FINANCIAL RELATIONSHIPS BETWEEN COMMUNITY BASED ...



FINANCIAL RELATIONSHIPS BETWEEN COMMUNITY BASED ORGANISATIONS AND THE FORMAL BANKING SECTOR

YCO’s PERSPECTIVE

Ms. (Dr) KIMBERLY JANE REID (KIM)

VANCOUVER, CANADA

Summary:

This paper focuses on the work of a local NGO, Youth Charitable Organisation (YCO), in Andhra Pradesh, India. Their title is deceiving for their work does not involve charity or welfare. Instead, their focus is on developing self-sufficiency and autonomy among the rural poor, particularly women, using a participatory approach. The paper starts at the beginning with the gradual development and evolution of a micro finance programme. The reader is shown the elation and many pitfalls YCO experienced with their target communities, the formal banking sector. YCO staff has just celebrated their 21st birthday and are looking to their future role as an NGO with great experience in development in Andhra Pradesh. Slowly they have come to realise that self-sufficiency and autonomy are necessary for themselves as well as the communities they advocate. The absence of dictation and conditions demanded by outside agencies will allow YCO the freedom to implement their development programmes according to their unique understanding of the issues facing the poor people in Andhra Pradesh. The decisions made in the next five years will determine how successful YCO is at becoming self- sufficient.

Evolution of YCO’s Micro finance Programme

In 1981, YCO began as a secular, non-profit, non-political and non-government rural development agency in Yellamanchili, Andhra Pradesh. Their vision was “to create a just society which recognises the dignity of a person through sustainable development.” Emphasis was placed upon socio economic programmes where YCO supplied necessary resources and services to their target groups, mainly rural villages. Agro forestry was an early focus for YCO; providing plants for the rural backyards, setting up nurseries for community block farming and planting trees in waste and community lands. YCO village coordinators emphasized the importance of proper and efficient land use and cooperative farming benefits. Additional programmes included health, sanitation and disaster preparedness.

At an international level, important changes took place in the late 1980s in the conception and implementation of development projects. Traditional ways of dealing with poverty, through the planning and action of central or state governments, or private institutions, were costly and reached only a small number of select people. Public and private institutions in many countries began to address poverty in new ways, based on community solutions and community involvement. This discovered that successful and sustainable development schemes shared a common theme; the inhabitants were involved, from the beginning, in project design and implementation.[1]

In the spirit of this movement, YCO had already organised the village women into Sanghams or women groups. YCO encouraged the women to meet and discuss their common problems and come up with their own solutions. This specific focus on women came from their essential place within Indian Society. Most rural women have multiple roles: wife, mother, homemaker and provider and, due to sheer survival pressure, poor women usually run their individual economic activities efficiently. Despite this, formal lending institutions were unwilling to lend to poor women as they lacked collateral and were considered a poor credit risk.[2] The majority of poor households resorted to moneylenders who charged an extortionate rate of interest. Many were unable to repay their loans and subsequently lost their assets and/or became bonded labourers.[3]

Through consistent and meaningful contact, YCO staff slowly began to comprehend the dire need of these rural families. A main issue was the multiple numbers of responsibilities placed on a woman’s shoulders. Rural women remonstrated over their inability to work in the fields and look after several young children at the same time, especially when sickness hit the family. It was a vicious cycle, for a sick child kept the mother at home and prevented her from earning vital income. Loss of income resulted in less food and the children were the first to suffer. In response to this situation, YCO introduced their first saving programme, although money was not involved. While preparing the evening meal, each woman was encouraged to put aside evening meal, each woman was pooled in each village and used to feed the children in a day care centre run by the women on a rotating basis. In this way, the community shared individual burdens and the women received their first lesson in saving.

The Start of a Micro Finance Programme through revolving fund:

The women from one village realised their children were still not getting enough to eat. In response, YCO helped them establish their own women savings and loan group in 1986. The Swedish International Development Agency (SIDA) provided Rs. 120,000, which YCO used to establish a revolving fund. This fund enabled 40 members of women association at Gobburupalem village to each borrow Rs. 3000. Each woman bought a dairy buffalo and the milk substantially increased her monthly income. The loan was repaid in 20 months at Rs. 150 per month with no added interest. The beauty behind the revolving fund was that the money circulated within the community. Principle capital was repaid into the fund and used for subsequent loan phases.

Eventually, women from all the 30 target villages of YCO informal savings groups were established. Each member saved between Rs. 3 to Rs. 10 per month, which was added to the revolving fund financed by SIDA. From 1987 to 1991, YCO used the revolving fund scheme to provide interest free loans to the women associations and promote income generation opportunities. YCO encouraged the women to use the money to purchase dairy buffaloes, agriculture supplies, fish vending, palm fibre making, petty trade and vending etc.

It was clear that the women were starting to speak out against their poverty and their children’s empty stomachs. Before these women associations were organised, rural women would not show their faces to strangers much less shout out in anger. Initial efforts at establishing an informal savings and credit system through the revolving fund, paved the way to greater solidarity. In 1991, YCO hosted a discerning meeting with sixty women from thirty villages to discuss the possibility of creating a women’s federation. This meeting focused on the savings and credit programme as well as other community development issues. Representatives from various commercial banks were invited as YCO and the women felt they had proved their credit worthiness through their informal savings groups. Here was an excellent example how community involvement and implementation, through the assistance of a motivated local NGO, can result in a successful and sustainable development programme.

The result of this notable meeting was the re-formation of the women associations. Each village group was called a Mahila Mandal (Women Association) and was divided into smaller savings groups called Ten (Team) Action Group (TAGs). Each TAG had ten women members who shared a common socio-economic background. Eventually over 5500 women belonged to this women associations with each woman savings an average of Rs. 22 per month. Supported by YCO village coordinator, each women association monitored loan repayments and encouraged their members to save. Peer pressure and high motivation resulted in consistent savings and timely loan repayments. They recognised the more the group saved, the better their chances at acquiring a loan.

YCO’s First Micro Finance Hurdle:

Most new schemes have difficulties and YCO’s revolving fund and income generation programme was not an exception. Despite its sustainable advantages, the revolving fund was too small to meet the loan requirements. There were long waits between loan phases and loan sizes were restricted to a maximum of Rs. 500. This amount was not enough to make an appreciable increase in monthly income; an average female buffalo and calf costs between Rs. 3000 to Rs. 4000. As the individual earning power of rural women is low, they were unable to increase their savings contribution to a degree that would meet the financial needs of the community. A larger monetary source was necessary to meet the villager’s financial requirements.

YCO decided to reach out to the formal banking sector. They conducted a meeting with officials from Canara Bank, Bank of Baroda along with representatives from the women groups. YCO proposed that the banks finance the women groups against their savings fund. A representative from the National Bank for Agriculture and Rural Development (NABARD) participated in this meeting and explained NABARD’s self help group scheme; a national programme to facilitate extension of credit to women groups. The banks agreed to finance the loans with or without the NABARD scheme using YCO as the intermediary. In 1993, the first loan phase, amounting to Rs. 870,000, was released from the banks to distribute to 34 TAGs. Neither NABARD nor the Reserve Bank of India required a collateral deposit, yet the local banks demanded Rs. 295,000 of the people’s savings for that purpose. This was YCO’s first indication of the inflexibility inherent to India’s formal banking sector.

NABARD’S SELF HELP GROUP SCHEME: YCO’s first encounter with India’s formal banking sector:

Up until 1993, YCO’s efforts were confined to the community level and all capital revolved and benefited the community. To meet the women groups’ growing demand for loans, YCO solicited the help of formal lending institutions. From this point on, capital left the communities in the form of interest payments to the banks and to NABARD.

YCO and the community groups were understandably thrilled to be finally accepted by formal banking institutions. Up until 1993, these women and their families were completely ignored by this sector. YCO and women wanted this new relationship to begin as a full working partnership. The women committed themselves to building their capacity; savings consistently and repaying small loans in a timely fashion. This would further establish their credit worthiness and consolidate their relationship with the banks to the point where YCO, as the intermediary, could gradually withdraw. Many as an essential step in development consider this gradual evolution, where the community solidifies its relationship with the formal banking sector and slowly withdraws from the protective umbrella of the NGO.[4] This axiom will be discussed later as it becomes entirely a function of the formal banking sector environment.

Initially the women saved an average of Rs. 22 per month, which was placed in a fixed deposit account and used as collateral security against the loans extended by the banks. These savings were not available for loan financing. The total savings of all the women associations came to Rs. 2222222, as of 31st January 1997.

NABARD recovered the loans over a three-year period. They advanced the capital to the banks at an interest rate of 6.5% per annum and the banks loaned to YCO at 11%. NABARD restricted YCO not to charge more than 12% to the women groups. To cover the administration, managerial and capacity building costs 1% stake to YCO was not sufficient. The ultimate women member borrowed 18% from their Women Associations. All other default payments were the first responsibility of the TAG, followed by women association. Overall, the NABARD’s self help group scheme worked smoothly between YCO and the community groups. This was understandable as YCO staff clearly understood the unique problems facing the villages and endeavored to meet their needs with flexibility and responsiveness. In contrast, relations between YCO, the intermediary, and the formal lending institutions were fraught with difficulties.

Problems with the formal banking sector:

The partnership between the Women Association and the formal lending institutions must necessarily be an equal one. Where the community promises to become bank worthy, the banks must also promise to strengthen their existing procedures. They must show flexibility with respect to the unique circumstances of the rural poor and they must show sensitivity to the families’ plight of poverty. Additionally, the banks must increase their responsiveness to the poor and help build trust and confidence between their institutions and the villagers.

The women associations fulfilled their terms and conditions of the NABARD self help scheme by savings consistently, depositing their growing capital with the banks and repaying their loans in a timely fashion. The banks, however, fell well short of their responsibilities. YCO discovered that flexibility, sensitivity and responsiveness were practically non-existent in bank vocabulary. Each new loan phase had new conditions introduced without justification and their response to loan requests took an interminable time. Woman had to place their loan request at least six months ahead of their demand. Since rural income levels were highly inconsistent due to sickness, weather and natural disasters, this was hardly responsive to the needs of the people.

In some instances, traditional banking procedures prevented the opening of savings accounts in the name of the registered group. Many of the nationalized rural banks bluntly refused to allow the savings accounts in their branches. Other banks permitted savings accounts but refused to pay even simple interest. Contrary to NABARD’s own requirements, the banks demanded the groups’ savings as a fixed deposit collateral instead of allowing them to be used for local investment. This sort of bureaucratic response is well documented in thrift and credit schemes around the world. Common problems cited are insistence of regular payments with little flexibility according to income, fixed time periods for loan financing and repayment and a demand for collateral, which most households are unable to provide.

YCO found their own relationship with the banks frustrating and patriarchal. The banks demanded income and expenditure particulars of YCO, asset particulars of the YCO Board members and the asset particulars of YCO as an organisation. They often made comments on YCO’s administration expenses and demanded a monopoly holding over YCO’s funds. YCO’s experience with the banks through NABARD self help group scheme continues in the same fashion to this day.

Great changes transpired since the days of a community based revolving fund managed by YCO and funded by the people and external granting organisations. YCO was troubled by the banking sector’s reception. They were also concerned that the true beneficiaries of the NABARD SHG scheme were not the community members, but NABARD and the lending institutions. NABARD was earning 6.5% interest per annum on each loan phase and the banks were acquiring 5.5% plus 0.5% interest tax.

Following statement will give you details about the stake benefits to the different actors in promoting bank linkage of SHGs through NGOs under NABARD programme.

|No |Particulars | |

|1 |Total SHGs benefited |721 |

|2 |Total Individual members benefited |7210 |

|3 |No. of phases of finance |8 phases by 2 banks |

|4 |Total amount of SHG savings with the 2 |Rs. 61,91,203/- |

| |banks | |

|5 |Total Loan received as on 31.3.2001 from 2 |Rs. 3,75,80,000/- |

| |banks | |

|6 |Total Principle repaid as on 31.3.2001 to 2|Rs. 2,33,96,053/- |

| |banks | |

|7 |Total Loan Outstanding as on 31.3.2001 to 2|Rs. 1,41,81,947/- |

| |banks | |

|8 |Total processing fees collected by banks |Rs. 4,28,101/- |

|9 |Total processing fees collected from SHGs |Rs. 1,80,250/- |

|10 |Total Interest Collected |Rs. 90,52,340/- |

|11 |Total Interest paid to banks including |Rs. 63,96,468/- |

| |NABARD stake | |

|12 |Total interest stake received by NABARD’s |Rs. 35,10,647/- |

| |stake 6.5% | |

|13 |Total Interest stake received to banks |Rs. 28,85,821/- |

|14 |Total interest stake received by YCO |Rs. 4,40,099/- |

|15 |Total interest stake received to SHGs and |Rs. 22,15,773/- |

| |Women’s Cooperative | |

Without any credit risk and additional capital investment for capacity building for the self help groups NABARD is benefited with an amount of Rs. 35,10,647/-. Cost of their funds more or less free from SDC, KFW and GTZ etc., Under the SHG and bank linkage programme through an NGO the first beneficiary is no doubted NABARD.

Coming to the question of bank(s), they got 75% credit risk because they are financing 4 times more than SHG savings. Their operational costs are nil because YCO is their borrower and it is a single loan application. So they are not incurring any costs for recoveries. In addition to that the banks collected an additional amount of Rs. 4,28,101/- towards loan processing charges. Where as the YCO was able to collect only Rs. 1,80,250/- from SHGs/individual beneficiaries.

This was capital leaving the community and entering the pockets of these institutions. To address these headaches, YCO must look elsewhere and internally.

Rastriya Mahila Kosh (RMK): By passing the formal banking sector:

Rastriya Mahila Kosh (RMK) or National Women’s Fund is a programme set up by the Indian Government to provide loans to women through an NGO. RMK accepted YCO as an intermediary because of their savings and loan experience and their excellent loan recovery rate; greater than 95%. The RMK programme offered loans up to ten times the capacity of YCO and conveniently by passed the formal banking sector by lending directly to YCO.

YCO was able to finance RMK loans directly to the Women Associations without answering to the unresponsive bureaucracy of the formal banking sector. Today, an RMK loan can be financed within twenty days of the loan request, meeting the unique needs of a community vulnerable to inconsistent income.

In light of community participation in the planning and implementation of self-help schemes, YCO reflected on its past decade of community work. They realised that the women associations were slowly but surely moving away from autonomy and relying more on outside financial agencies such as RMK and SIDBI. To address this particular concern and to further by pass the uncooperative nature of the formal banking sector, YCO promoted a Mutually Aided Cooperative Society as a Community Based Financial Institution.

Swayamkrushi Women’s Development Mutually Aided Cooperative Thrift Society: Self Sufficiency and Autonomy:

The main aim of the Women’s Cooperative is to provide timely finance to its members and make the women shareholders of their own institution rather than dependent on external charity. As prescribed by the Andhra Pradesh Government Mutually Aided Cooperative Societies Act 1995, Women’s Cooperative members must be recruited from those households living below the poverty line. Additionally, they must either be marginal farmers, landless labourers, artisans or fisher people and must have a perfect track record of savings with their women’s association. At present the Women’s Cooperative concentrates its activities in YCO’s 150 target villages in Visakhapatnam District. They hope to increase by another 50 within the next five years.

Known colloquially as the Women’s Cooperative or Women’s Bank, this financial institution was set up in 1996 with an authorised share capital of Rs. 500,000 and increased to. Each member buying ten shares at Rs. 10 per share. After fully repaying any outstanding loans from previous programmes, every women belonging to YCO’s savings and loan programme is welcome to become a shareholder in the Women’s Cooperative.

As of March 2001, there were 8890 shared holders in the Women’s Cooperative. All the monthly savings collected by the women associations are deposited with the women’s cooperative, where it earns 9% interest per annum as a recurring deposit. As soon as the savings are deposited they are available for loan financing through the Women’s Cooperative. Unlike the NABARD or other programmes, the member’s funds will be primary source of loans. The Women’s Cooperative charges 18% per annum for income generating loans, 12% for housing and 24% for consumption loans. As of March 2001, the total savings held within the Women’s Cooperative was Rs. 63,00,000. Like the revolving fund initially introduced by YCO in mid 1980s, the women’s cooperative is an excellent example of a community solution to a community problem. All capital generated within the community circulates locally and, as the women’s cooperative grows in reputation and assets, so will the community share-holdings.

Recognising the importance of the autonomy for community members, YCO decided to separate the Women’s Cooperative completely from YCO on January 16, 1997. Today fifteen seconded YCO staff work in women’s cooperative but until the society becomes completely self sufficient in March 2002. YCO would like its future role to be restricted to advising, arranging network opportunities with other NGOs and providing training and leadership programmes. This should ensure that the community participates in and completely controls its own development. To be completely self-sufficient where the primary sources for loan is community savings. Women’s Cooperative membership must increase 25,000 by 2005 and each member must save a minimum of Rs. 50 per month.

The future for Women’s Cooperative looks extremely bright. They have come a long way from those first few handfuls of rice. Both YCO and the community hope that the Women’s Cooperative will become a bank in its own right where they may deposit the women’s savings in their own account, and negotiate grants and funding directly with agencies such as SIDBI and RMK etc. Eventually smaller and more accessible branches may be opened within the mandals (blocks) as the area of operation cover a radius of over 100 km.

Capacity Building Needs of Women’s Cooperative:

YCO is into the multifaceted rural development programmes successfully for the last 20 years. The growth was study and the results were cost beneficial. The social capital built painstakingly over a period of two decades has prompted the organisation to a stock taking exercise and build up a Road map for the next three years. Obviously credit and the human resources are the two vital components in the process of micro corporatisation of the Social Capital.

Micro finance is the flagship of the programmes and is point of convergence for other development activities. YCO has fast visualized the change in approach in recent time from “grant” to “credit” and is fast readapting itself to the change.

Reasons analysed are:

i. Grant is limited in supply and scarce

ii. In consistent

iii. Unviable

And the credit is:

1. Wide based

2. Sustainable

3. Acceptable

The evolution is logical and the mutation is unstoppable as the community got sufficiently empowered to self manage their affairs and the change in mindset is testimony and justification for the grant flow all these yeas.

Quantum of Loan:

1. Short term Rs. 2500/-

2. Medium Term Rs. 4000/- to Rs. 6000/-

3. Short term production Rs. 4000/-

4. Housing low-income group: Rs. 35,000/-

5. Interest on savings for the first 6 months 4% is charged. After this period 10% is taken as fixed deposit.

6. The savings funds utilised as the chunk security deposit offered against the bulk loans and the present outstanding security deposits are Rs. 50 lacs.

7. Withdrawal of savings is allowed on group basis if the group is not having any outstanding loan. Inturn those who are not having any loan are only eligible for refund of savings.

8. Mode of repayment is on reduced balance and there is no concept of Equated Monthly Instalments.

9. Loan size is uniform.

10. There is no institution like Bookkeeper and the absence is conspicuous.

11. The groups are active in discussing the social issues and are not appeared to be confined to thrift and credit.

12. YCO is a culture working in close coordination with the Government and the groups appear to be not averse to Government linkages.

13. DWCRA over lap is a problem being encountered by the groups and remains unresolved.

14. There are no practises of poverty ranking and the groups are inherent groups with homogeneity.

15. There is no targeted approach but there are Scheduled Caste groups. But the organisation has not taken any commitment to cover particular number of socially downtrodden groups.

16. The TAGs get integrated at village level called Mahila Sangam, which are registered under Societies Act 1860.

Mahila Sangam (Women Societies)

It is intermediary structure, informal but registered and is representative in character. Each TAG sends two representatives. There are 143 such women societies in 7 mandals with an average of 5 tags per society. But the range may be from 3 to 25 TAGs per society. Women societies are coterminous with the village and theses are 150 such societies in 150 villages. Cooperative has plans to cover another 15,000 families in the next three years and organize them into TAGs and women societies.

It is the Mahila Society, which operates the Bank account and is the functional intermediary between TAG and YCO (earlier) and cooperative now. TAG borrows money from Mahila Sangam and disburses the loan amounts to the needy members as per the pre plan. Mahila Society also handles range of social development activities and is really vibrant grass roots people’s body.

YCO and the Cooperative-The Co-Habitation

YCO has developed the cooperative as its corporate wing exclusively devoted to women to meet their credit needs. Some of the reflection on YCO and cooperative are mentioned below.

|S. No |Indicator |YCO |Cooperative |

|1. |Statutory |Registered as Society under 1860 |Registered as Mutually Aided |

| | |Act. |Cooperative Society under AP MACS |

| | | |Act. 1995 |

|2. |Status |Not for profits |For profits |

|3. |Coverage |Holistic and entire range of |Thrift and credit and micro finance. |

| | |programmes including micro finance. | |

|4. |Gender |Both men and women |Only women |

|5. |Corporate relation ship |Bulk loan intermediary for the |Retailer for the bulk loan borrowed |

| | |cooperative |by YCO. |

Reposition Strategy:

YCO is handholding the cooperative since its inception. It has withdrawn major support from April 2000 onwards. But the following areas of support inevitable for the cooperative for another five years after which it becomes totally autonomous in operation.

1. Bulk loan – Financial institutions are not recognizing the cooperative under MACS Act. (NABARD refinanced commercial Banks).

2. The Cooperative has not completed 3 years (completed 3 years in the current financial year)

3. Securities offered as collaterals are still with the YCO and to that extent the cooperative has to lean on YCO.

4. Staff support to the extent of 10 members with half of their time invested on the cooperatives is not capitalized and withdrawal or capitalization is envisaged from the current financial year on tapering basis.

5. Grant assistance especially the training and HRD component are availed by the YCO and passed on to the cooperative to the extent of its organizational needs.

6. The underlying principle is change in role model of the actors and stakeholders from Manager to facilitators in the path of community empowerment.

PROGRAMME EXPANSION PLAN: AREAS OF KEY RESULTS

1. PHYSICAL GROWTH INDICATORS

2. FINANCIAL GROWTH INDICATORS

3. HUMAN RESOURCE INDICATORS

4. INFRASTRUCTURE

5. CAPACITY BUILDING AND HRD

6. MANAGEMENT INFORMATION SYSTEMS

7. LIVELIHOOD SUPPORT INTERVENTIONS AND ENTERPRENUERSHIP DEVELOPMENT PROGRAMMES

8. INNOVATIONS AND RESEARCH

9. MEMBER WELFARE AND SOCIAL SECURITY

10. IMPACT ASSESSMENT, DOCUMENTATION AND PROGRAMME MONITORS

Training Needs-Who are to be trained?

I. Members:

a) Executive Committee members

b) Group Leaders:

▪ TAG Leaders

▪ Mahila Sangam leaders

II. Programme personnel:

i. Chief Executive Officer

ii. Senior Field Officers

iii. Technical staff

iv. Accounts staff

v. Internal auditor

vi. Field staff

vii. Trainers

viii. Book writers

Broad Areas and Subjects were capacities are to be built up:

▪ Credit Delivery Technology

▪ Finance and Resource Management

▪ OD and ID, Accounts Staff

▪ Internal Auditor, Field Staff

▪ Trainers

▪ Book writers

Broad Areas and Subjects where capacities are to be built up:

1. Credit Delivery Technology

2. Finance and Resource Management

3. OD and ID

4. Accounts, Audit

5. Human Resource Development

6. EDP and IGAs

7. MIS and Automation, Economic Data Processing

Specific Areas of Capacity Building:

Members:

A. Executive Committee members:

1. Cooperative Principles and sprit of cooperation

2. MACS Act, salient features

3. Conduct of Board meetings and General Body Meeting

4. Roles and responsibilities of the EC

5. Dos and Don’ts for the EC

6. Participatory Development skills

7. Government Development Programmes

8. Community and social capital formation skills

9. Performance review and progress monitoring

10. Cost benefit analysis of the programme components and self finance modules

11. Strategic business planning

Group Leaders:

1. Best practices of SHG and vision building exercise

2. MACS and its principles and objectives, role and responsibilities of the members

3. Ongoing government programmes

4. Participatory family development appraisal and micro planning process

5. EDP and generation of credit demand

6. Techniques of group portfolio building

7. Gender and cooperatives and conflict resolutions

8. Micro Credit Management

9. Dos and don’ts in the SHG and Cooperatives

10. Community asset building techniques

Members

1. Orientation to MACS and SHGs

2. Livelihood support plans and vision building process

3. Gender issues

4. Conflict resolutions

5. Panchayat Raj and Women and 42nd amendment

6. Best practices of SHGs

7. Member education on cooperatives

8. Government Programmes

9. Community assets building process

10. EDP and IGAs.

Programme Personnel and Facilitators:

I. CEO and Sr.Field Managers:

1. Cooperative Principles and MACS

2. Financial Management

3. OD and ID

4. MIS

5. Credit Management and delivery technology

6. Fund mobilization techniques

7. Audit, Programme Monitoring and Evaluation

8. Strategic Business Planning

9. Participatory Micro Planning Process

10. Government Programmes

II. Technical Staff and Field Managers:

1. Credit Appraisal and credit needs assessment

2. Credit Delivery technology

3. Self Help Group best practices

4. Enterprise promotion and livelihood support interventions

5. Strategic Business planning

III. Accounts Staff

1. Economic Data Processing

2. Records and Bookkeeping, cooperative accounts

3. Preparation of financial returns

4. MIS

5. Audit and Monitoring

6. Automation

7. Statutory Requirements of MACS

8. Viability analysis techniques

9. Communication skills

IV. Internal Auditor

1. MACS Act and statutory requirements

2. Operational Manuals, Byelaws and business rules (subsidiary rules) and audit rectifications

3. Financial Audit

4. Personnel Audit

5. Inspection kit and Audit rating techniques

V. Trainers:

1. Participatory Training, Skills

2. Preparation of training tools

3. Training Planners

4. SHG and cooperative related issues

5. Reports and evaluation

VI. Book keepers:

1. SHG Books and record writing skills

2. Dos and don’ts for book writers

3. MIS and reports

4. Viability Plans

5. Loan documentation method

FINANCIAL GROWTH INDICATORS:

1. Share Capital and Deposits

2. Loan Disbursement

3. Borrowing Powers

4. Loans Outstanding, Borrowings and Recoveries

5. Statement on Reserves

6. Profit and Loss statement

7. Receipts and Payments

8. Balance sheet

MANAGEMENT INFORMATIONS SYSTEMS

The Organization is poised to grow and the growth demands information inflow and outflow of high accuracy and speed. Obviously the entire system of operations have to link to information Technology. The present MIS is not up to the mark and the volume of credit, the Institution is going to handle can never be matching with the member information, financial flow analysis and movement of socio economic indicators.

Another key area where information management is to be modernized is the accountancy at the group level. The group spends precious one hour in every meeting for money transactions and their postings in their books of accounts. Hardly there is another one hour left for them to transact other business and social issues.

Average size of loan is also likely to go up in the next three years and accurate and up-to-date posting of the information may lead to group conflicts, lack of transparency and seepage of income.

Livelihood Support Interventions:

The community is by and large dependent on dairy farming and agriculture labor and requires exposure to range of livelihood support activities. The Organization has to have a fresh look at the possible opportunities in on farm, non-farm and off farm sectors and a strategic business plan is required with strong back ward and forward linkages. The widening credit base also leads to capital formation at group and family levels and the deployment of micro capital has to back up by a strong Entrepreneurship Development Programme. The Organization should have full time team of EDP and hand hold the community in the beginning and build capacities to sustain wide range of economic activities.

Innovations and Research:

Micro Finance is throwing open wide range of innovations to add depth and width to the efforts of the different stakeholders. SMART Card: Is now gaining popularity with the Micro Finance field and the YCO can emulate the system for transparent and accurate recording of transactions. Mutual Market: A closely knitted community of 8000 families has wide range of consumptive and productive needs and they constitute the captive buyers. The Cooperative has to innovate the ways and means to build up a rural super bazaar and the investment has to come from each group on each item on a continuity basis.

Member Welfare and Social Security:

The collective strength of the Cooperative throws into foray a wide range of risk coverage and welfare. Old age pension, prenatal care, girl child endowment are some of the examples. Innovative micro insurance are on the anvil with the insurance industry throwing open to the multinationals. The Cooperative has to forge alliance with these insurance companies for wide range of long-term benefits.

Impact Assessment, Documentation and Programme Monitors:

YCO has a culture of good documentation. Independent agencies have done in-depth study of the growth process. Introspection and retrospection clearly give way for the future and the concurrent evaluation of the programme will go a long way in helping the organization to build a road map.

Word of Warning:

Sustainability is not only about money. A viable and self-sustaining women’s cooperative loses its value if its programmes exclusively concern financial services. Complementary services such as training, counseling, literacy, health, nutrition etc., are necessary elements in development that are often forgotten in the rush to become financial sustainable.[5] When the Cooperative separated from YCO in January 1997, its mandate was concerned only with financial services. This outlook may have to change to address other essential development issues.

CONCLUSION:

Many academics and development professionals place great importance on the successful integration of community-based organisations into the formal financial sector. This axiom is in danger of becoming inflexible dogma unless the unique environment surrounding both the low-income community and the formal financial sector is taken into account. The necessary conditions for a successful partnership depend on the particular context within which the relationship is operating. While it is true there are excellent examples of viable partnerships with the financial sector in other developing countries, this may not be the case for Andhra Pradesh or, perhaps, India.

YCO has 20 years of experience in the unique development problems facing poor families in Andhra Pradesh. YCO’s successes include the following:

1. The organisation of rural women into self helps groups. This have given them a medium through which to voice their anger and frustration against poverty and to search for their own solutions;

2. The establishment of the micro finance scheme, which permits poor families to save and acquire loans to improve their income. This scheme reaches beyond the financial benefits. It also teaches self-sufficiency and self- confidence.

3. The establishment of women’s cooperative, an organisation working for the benefit of the community and not for profit. This cooperative shall eventually operate as a bank in its own right giving control to the people over their livelihood. This last is quite crucial. If the Women’s Cooperative becomes as a community based financial institute in its own right and successfully meets all the financial needs of the community shareholders, what is the need for the formal banking sector? One could argue that once the Women’s Cooperative reaches this powerful level, the community members, who not only run the Cooperative but also dictate its policies, will be able to deal with the formal financial sector as an equal partner. Short of this, the communities will always be merely clients who must suffer the insensitivity and inflexibility of the formal banks. The context within which the scheme is operating must determine the strategy used. In the context of formal banks in Andhra Pradesh, an autonomous approach through the Women’s Cooperative has been far more successful than integrating the communities directly with the formal sector.

YCO has grown to a stage where it can look back over its successes and use its experience to skillfully map out its future. For the last twenty years, YCO has depended upon outside funding to meet its administration and managerial costs. Now is the time for YCO itself to become self sufficient and autonomous just as they advocate for their target communities. Plans are in the works to establish agro industries like cashew processing, dairy farming, cold storage etc., would earn capital to support YCO’s development efforts. Care must be taken to ensure that management of these ventures does not encroach upon YCO’s main raison d’etre, “to foster a sustainable process of ongoing change for the socio economic benefit of the rural poor through their own means and effort.” In the effort to become sustainable, moneymaking ventures have been known to eat up resources and time previously spent on development programmes.

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[1] Arrossi, S., Bombarolo, F. Hardoy, J. Mitin The Role of NGOs in Community Development: the work of community organisations, chapter 3; Funding community initiatives, Earthscan Publications, London, pp.33-34

[2] M. S. R. Prem Kumar, YCO Savings and Loans Hand Book, Page 4

[3]Mahon, D. Business Plan for Micro finance activities of Women’s Cooperative on behalf of YCO,

[4] Platt, S. R. Low cost housing finance in Andhra Pradesh, India

[5] Congo. Y, Financial Sustainability and perennity of micro finance experience in Africa; an analysis of experiences in Burkina Faso, from Micro enterprises, ADA, Luxembourg, pg 162.

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