turning cold money hot

7/30/2019 Turning Cold Money Hot

1/13

TurningCold

Money

Hot

WhatTheSHGMovementCanLearnFromAnAlternateApproach

KimWilson,VisitingFellow

August2013

I IntroductionIndiasfinancialecosystemisevolvingatarapidpace,yetcommercialandevenpublicactorscontinueto

bypassrural

households

in

search

of

more

profitable

and

more

easily

reached

markets.

Picking

up

the

slackareNGOs,underevertighteninglegalconstraints,andmassivegovernmentledprograms.The

schemesoftheNationalBankofAgricultureandRuralDevelopment(NABARD)andNationalRural

LivelihoodsMission(NRLM)arefarreachingandcarrywiththemamandatetodevelopruralfinancial

marketsaswellastosupportpeoplelivingandworkinginthesemarkets.Withinthesebroaderforces,

theAgaKhanFoundationanditspartnersi inIndiahaveenjoyedsuccesswithamethodcalled

CommunityBasedSavingsGroups(CBSGs),whichassistsruralandperiurbanwomenandmenin

puttingtheirfinancialresourcestowork.

TheaimofthispaperistopersuadepractitionersfamiliarwiththeSHGmodeltoassesstheadvantages

oftheCBSGapproachandtoadoptfeaturesrelevanttotheircontexts.

1. WhatisanSHG?

Initiatedinthe1980sbyseveralNGOs,theSHGmovementevolvedtoincludebanksandgovernment

stakeholders.ManystatesinIndiapromotetheformationofSHGsforavarietyoffinancialandsocial

purposes.SHGsareoftenencouragedtolinktoabankforcreditthatsupplementsthegroupcorpus.

WhilethereisnosingleSHGmodel,thereisasetofcommonlyusedpracticesthatareunderstoodto

expresscoreSHGprinciples.AnSHGconsistsof1020womenwhoselfselectintoafinancialgroup.The

groupsetstheamountandfrequencyofsavings.Italsodecideswhointhegroupmightreceivealoan,

forwhichpurposestheloansaretobeusedandtherateofinterestborrowersmuchpay.

Technically,most

SHGs

are

aform

of

ASCA

accumulating

credit

and

savings

association

with

no

set

dateonwhichthegroupcorpus(savings,interestincomeandfees)isreturnedtoitsmembers.

2. WhatisaCBSG?

ACommunitybasedSavingsGroup(CBSG)isanapproachpromotedbytheAgaKhanFoundationandits

partners.InspiredbytheVSLAmodelrefinedbyCAREinAfrica,byindigenousASCAsoperating

throughoutIndia,andbyPradansearlyeffortsineasternIndia,theCBSGmodelfollowsaspecific


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systemoffinancialintermediationii.Duringanintensive5daytraining,facilitatorsmasterasetof

principlesandproceduresinsavingsgroupformationandstrengthening.Withinlessthanayearoftheir

firstmeeting,CBSGswillhavegraduated,meaningtheycanmanagetheirfinancialactivities

independentofafacilitator.ThefacilitatorispaidbytheCBSG.

UndertheCBSGmodel,thefacilitatorbringstogether1520women,withgroupsizevaryingbylocale.

Membersmeetregularly,usuallytwicepermonth,topurchasesharesinagroupfund.Afterjustafew

weeksofmeeting,membersmayrequesttoborrowmoneyfromthefundforanypurposetheychoose.

Attheendoftheyearwhenallloanshavebeenrepaidwithinterest,thegroupsharesoutitscorpusiii,

distributingsharecapitalandproportionateincomebacktomembers.

Technically,CBSGsaretimeboundASCAs accumulatingcreditandsavingsassociationsthathaveset

dateinwhichthegroupcorpus(sharescapitalplusincome)isreturnedtoitsmembership.

3. Whatarekeysimilaritiesanddifferences?

TheCommunityBasedSavingsGroupapproachsharessomefeatureswiththeSHGapproach.Groupsof

1020orevenmorewomengatherforthepurposesofpoolingandmanagingtheirfinancialresources.

Membersmeetregularlyandareabletorequestloansfromthegroupcorpus.

But,thesimilaritiesendthere(seeBox1:FeaturesofSHGsandCBSGs).Laterinthispaperweexplore

crucialdifferencesandtheirimplicationsforfinancialinclusion.

Box1:FeaturesofSHGsandCBSGs

Feature SHG CBSG

Lengthoftimefromearlygroup

formation

until

complete

autonomy.

Threeormoreyears. Lessthanoneyear.

Thewayinwhichthegrouptakes

custodyofmembercontributions

Asregularsavingsdeposits,

usuallythesameamountper

personpermeeting.

Asregularsharepurchases

andcanvarybymemberand

bymeeting.

Socialfund

Distributionofcorpusbackto

members

Raredistributions;corpuscan

stayintactfordecades

Periodic(usuallyannual),

planneddistributionofcorpus

tomembersinproportionto

shares.

Recordkeeping Severalsetsofsavings,loan,

andledgersandpassbooks

Passbooks.Groupshave

optiontokeepasimple

ledger.

Creditfrombanksandoutside

sources

Highlypromoted Notpromoted,savingsare

promotedandoftenCBSGs

haveexcessliquiditytolendto

members.


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3

Metastructures(federations,

clusters,etc.)

Extant,oftenpartof

governmentSHGpromoted

programs

None

Governmentbenefits

through

groupsMany

SHGs

formed

for

the

purposeofchanneling

governmentbenefitsto

members.

CBSGmembers

may

choose

to

joinotherSHGgroups,but

CBSGsdonotchannel

governmentbenefitsto

members.

II ChallengesoftheSHGModelChallengesembeddedintothenormsoftheSHGapproachunintentionallyexcludesomeofthevery

peoplethat

the

SHG

movement

hopes

to

serve.

We

examine

afew

of

the

more

critical

challenges

below.

1. ServicesdonotmatchthecashflowofmembersorthecapacityoftheSHG.

TheincomeofmanypoorSHGmembersdependsonwagelabororfarmingactivity.FewlivinginIndias

hardpressedruralareasenjoysteadyemploymentwithmuchofhouseholdearningsbeingseasonal,

basedonfarmingcyclesandwagelaborpatterns.Becauseincomeisplentifulatcertaintimesofthe

yearandscarceatothers,thecapacityofmemberstomakeregularsavingsorloanpaymentsislimited.

(Sinhaetal2008).

Exaggeratingtheimpactofirregularincomeistheoccurrenceofhouseholdemergencies.Aboutof

malariaor

aflare

up

of

joint

pain

can

bring

on

sudden

costs.

Irregular

income

and

erratic

expenses

createcashflowvolatility,reducingamembersabilitytomakesteady,samesizepaymentstoher

group.Memberswhoarechronicallyillorwhohavechronicallyilldependentsinparticularunderstand

theirtendencytobouncefromsmallemergencytosmallemergency. Theyknowexpenseswill

emerge.Theyjustdontknowexactlywhen.

Samesizesavingspaymentsdonotworkforthesekindsofmembers.Infact,samesizepayments

ensurethatthegroupcorpusshrinkstothepaymentcapacityofitspoorestormostcashvolatile

members.Shouldamemberbecertainthatshecouldcommit5rupeespermonth thoughinsome

monthsshemightdeposit25rupees sheclaim,inanefforttoreducetheriskofovercommitting,that

hermaximummonthlysavingscapacityis5rupees.

Thesamesizedepositnotonlyrobsmembersofthechancetosetasidemoresavingswhentheyhavea

littleextramoneyinthehousehold,itdeprivesanSHGofthechancetoincreaseitscorpusandearn

moreinterestincomeforitsmembers.TheSHGhastwooptionswhenfacingthisdilemmaofsamesize

payments: excludememberswhoarepoororcashvolatileorincludethemandminimizethebenefits

tothegroupatlarge.


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Thoughthereasonswhygroupsgenerallyrequirememberstokeepsimilarsavingsbalancesare

unknown,ourfieldresearchindicatesthatmaintainingconsistent,samesizepaymentsmakeforeasier

recordkeeping.Designingaproductorprocessaroundeaseofrecordkeepingseemsaclumsy,supplier

orientedwayofofferingpeoplethetoolstheyneedtomanagetheirfinanciallives.

2. SHGsoftenrequirenewmemberstomatchexistingmembersavings.

SHGsoperateunderadefactorulethatrequiresprospectivememberswhowanttojoinanexisting

grouptocontributealumpsumequaltotheindividualsavingsofeachmember.Forexample,ifthe

averageindividualsavingsofamemberis2000rupees(about$40),thenanewmemberwouldneedto

comeupwith2,000rupeesforherinitialcontribution,eventhoughittookothermembersmonthsor

yearstoaccumulate2,000rupees.WhythisnormexistsacrossIndiaisnotknown.Likelyithastodo

withtheinabilityofSHGstomanagevaryingamountsofdeposits,eitherbecauseofacomplicated

systemofrecordkeepingorbecauseofthewayinwhichmembersweretrained.

Whatever

the

cause

of

this

norm,

the

condition

that

a

new

member

must

muster

an

entry

sum

ensuresthatonlybetteroffpeoplejoinanexistinggroup. Shouldagrouplendstheentrysumtoa

newmember,thatnewmembermustimmediatelytakeondebt.Thisnormsguaranteesthatonly

potentialmemberswithgreaterfinancialmeanscanjoin.(Sinhaetal2008).

Italsodiscouragesyoung,marriedwomen,newtoavillageandwithoutmuchcapital,fromjoininga

group.WhenpressedSHGssaidtheyaddressedtheissueoflockingoutnewmembersbysuggesting

thatvillagenewcomersformtheirownSHGs.Naturally,thesenewmemberswouldnotbedrawing

fellowmembersfromalargerpoolofwomen,butpurelyfromarosteroftheareasmostrecent

arrivals.Enteringintoanexistinggroupisindeeddifficultforprospectivemembers. Onestudys

sampleof1942SHGs(Reddy&Reddy)indicatedthatonlytenhadadmittednewmembers.

3.

SHGslack

important

rest

periods

and

defined

share

out

dates.

TypicallySHGsaccumulatesavingsovermanyyearswithnobreaksinbetween. Itisnotdifficultto

imaginewhyfacilitatorsofSHGwouldpreferlonglifespansoftheirgroups.(Rutherford2009)They

spendagreatdealoftimesettingSHGsupandwouldprefernottodismantlethem.Permanentgroups

offerapermanentplatformsontowhichfacilitatorscanfixavarietyofotherservices.

Yetsuchaformulaofborrowingyearinandyearoutwithnodividendsdistributedtomembers,no

cleancompletionofafinancialcycle,noannualrestperiodsforfestivals,harvests,orpreparingfamilies

fortheinevitablerainsandfloodsignoresseasonalrhythmsandpreventsthechanceforgroupsto

periodicallyreconstitutetheirmembershipandcontinuesaving. Theresultisthatprospective

membersmay

be

excluded

from

participating

in

any

SHG

at

all.

There

is

no

logical

moment

of

entry

for

themiftheychoosetocomemidstream. WithoutautomaticrestperiodsSHGsmayunintentionally

excludesocialgroupsthatwouldenjoythebenefitoffinancialservices. Followingareafewexamples.

ExclusionofMigrants.InIndia,aprincipalincomecopingstrategyofruralhouseholdsisshorttermor

circularmigration.Itislargelyaninvisiblephenomenon,withlimiteddata.ArecentreportbyUNICEF

indicatesthatstudiesstruggletopinpointthenumberofadultsandyouthmigrating.Estimatesvary,


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suggestingthatanywherebetween15millionand100millionpeoplemigrateeachyear,mainlyin

searchofwork.Whatevertheexactnumbermaybe,UNICEFclaimsthatmostseasonalmigrantsbelong

toeconomicallydeprivedgroups(UNICEF2012).

Migrationmakes

an

SHG

members

presence

at

year

round

meetings

impossible.

Without

an

annual

breakinmeetingsorareturnofsharecapital,SHGsdonottakeintoaccounttherealityofpeopleonthe

move.Migrantswithseasonalworkpatternswouldneedtostopattendingmeetingsandmightliketo

uselumpsumsfromashareouttohelpsupporttheirtravel.Akeyreasonsmembersdroppedoutof

SHGsaccordingtoa2005studywasmigration.(Sinhaatal2008)

.

ExclusionofYoungWomen.Wehavealreadydiscussedhowanentrysumrequirementpreventsyoung

womenfromjoiningexistinggroupsintheirhusbandsvillages.Butthenormsgofurtherbydiscouraging

unmarriedwomenfromjoininggroupsintheirnatalvillages.TheSHGsdonotwanttobereturning

savingsthatamembermightwithdrawassherelocatestoherhusbandsvillage.Likelysuchan

accommodationwouldrequirealevelofaccountingbeyondthecapacityoftheSHG.

Unmarriedwomenmightappreciatethechancetoaccumulatesavingsfortheirweddingsortosetupa

newhome.Moreimportantly,theymightliketousetheirshareouttoprovidesomeindependence

fromafuturemotherinlaw,ortocollecttheentrysumneededtojoinanexistinggroupinher

husbandsvillage.

ExclusionofLateAdopters.ThefinancialpermanenceofSHGsmeansthereisnofixeddatewhen

groupscandissolve.Themostfinanciallydisadvantagedpeoplelivinginanareamightwanttowaitto

seehowanSHGfunctionsbeforejoining.Bytheydecidetojoin,itisoftentoolate.Theycannotcome

upwithanentrysumneededandthegrouplacksaclearpointwherenewmembersmightjoin.

Grouppermanencyproducesaadoublelockouteffect:membersarelockedouttheirsavingsand

newmembers

are

locked

out

of

existing

SHGs.

There

is

also

alock

in

factor

at

work.

Members

of

groupsfinditdifficulttoleavepermanentgroups.Groupshavedifficultycalculatingsavingsorensuring

thereisenoughliquidityintheircorpustofundafullwithdrawal. Ifelitemembers(Tankha2012)have

takenoverkeyfunctionsofanSHG,thenthelesselitemayfindthemselvesinastateofpermanent

capture,meetingendlessexpectationstoproduceregularsavingswithouttheclearbenefitofbeingable

toaccessthosesavings.

4. Complicatedrecordslimitsavingsaccessandcreatedependency.

Aswehaveseen,contributingtobothlockoutandlockinisthetimeunboundednatureofSHGs.

Alsocontributingarecomplicatedbookkeepingsystems,whichthoughnotrequiredofSHGs,seemtobe

thenorm

of

SHG

operations.

Regular

deposits

are

noted

in

ledgers

and

passbooks.

Loans

taken

and

paymentsmadeareregisteredinasimilarmanner.Thesesystemsmaketheprospectofreturning

savingstoamembercomplicated.

Aoneroussystemofpassbooksandledgersguaranteesthatgroupswithlargelyilliteratememberswill

notbeabletoselfmanagetheirfinancialactivities.Instead,theymustrelyontheassistanceofexternal

recordkeeperstoperformtheevenmostbasicfunctions.


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SHGsacrosstheboardsufferfromincomprehensibleandinaccuratebookkeeping.Besidesthewasteof

timeofkeepingmultiplebooks,therecordsareofteninaccurate,subjecttooverwritinganddouble

entry,additionandsubtractionmistakesaswellasomissionofimportantinformationlikeloan

repayments.

Inasimple

audit,

one

study

found

that

40%

of

groups

had

weak

records.

Many

had

not

beenupdatedforayearormore(Sinhaetal2008)

5. Externalcreditcanbeconfusinganddamaging.

NationalandgovernmentschemesinIndiaofferSHGscredittosupplementtheloansfromthegroup

corpus.Intendedtohelpentrepreneursprocurefixedassetsorfundworkingcapital,evidencedoesnot

bearouttheseusesofcredit.

InMicrofinanceSelfHelpGroupsinIndia,AjayTankhawritesthatSHGs,dependentoncredit,suffer

fromalimitedcapacitytoabsorbnewroundsofcredit,particularlyafterthethirdorforthround,yet

theystill

seek

more

credit.

With

their

capacity

to

handle

larger

loans,

SHGs

may

experience

aphenomenonsimilartothatofthePeterPrinciplewhereinSHGsrisetotheleveloftheirown

incompetence,i.e.borrowandreturnloansfrombanksuntiltheyareunableorunwillingtodoso.

(Tankha2012)

Creditlinkagesareunderpressure.Arecentstudy(Tankha2012)showsthatinalargenationalscheme

thenumberofSHGloansfrombankshasdeclinedoverthepastthreeyears.ThenumberofSHGslinked

tobankshasalsodeclined.Inpart,bankersthemselvesfindtheadministrativeburdensnotworththe

income.Moreperilousisthatbanksextendingcredit,mayactuallybecompetingwiththeinternalfunds

ofSHGs.Further,toqualifyforcredit,somebanksdemandgroupdeposits.TheSHGscannotaccess

thesedeposits,whichcouldotherwisebeusedtofundthecreditneedsofgroupmembers.

Infact,SHGmembershavebecomedissatisfiedwithrelativelysmallaverageloanamounts(Srinivasan2010).Loansizesarelikelytostaysmallifsaverscannotgarnergoodreturns.BecauseSHGfacilitators

discouragereturnsinfavorofaccessingbankcredit,thereislittleincentiveforsaverstosavemorethan

theminimum.

Whilelinkstosourcesofcreditcanbeusefultomaturegroups,itcanbedamagingtonewgroups.SHG

facilitatorsareoftentaskedwithhelpingbankstocollectloans,anactivitythatblurstheirroleasan

enablerofselfhelp.Worse,membersshakedownfellowmemberstocollectloansinorderthatthe

groupmightqualifyforafreshroundofexternalcredit(Sinhaetal2008).Andfinallylargerloansare

oftenreservedformoreelitemembers.

6.

Complicatedservice

structures

create

new

burdens.

Stategovernmentspromotemorethan75%ofSHGsinIndia(Tankha2012).Wheregovernmentstaff

wasonceresponsibleforbuildingbasicinfrastructureordeliveringbasicservices,SHGshavebecome

responsiblefortheseactivities.Livelihoodsimprovement,forestrymanagement,watermonitoringnow

fallintheprovinceofSHGs.ManyschemeslayerontoSHGscomplicatedsuperstructuresthatrequire

groupstofederateandclusteratdifferentlevels(seeBox2).Variousfinancialandmanagement


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mechanismsdeployedbytheprogrammeensurethatSHGsremainlargelycreditdrivenanddependent

onoutsidesupport(Ledgerwood2013). Ambitiouscoverageandsaturationgoalsoftheschemecause

onetowonderhowavillagermightoptoutwithoutlossofdignityormarginalization.

Box2:

Jeevika

National

Rural

Livelihoods

Mission

in

Bihar:

An

Example

of

New

SHG

Burdens

WithsupportfromtheWorldBank,Jeevikaseekseconomicandsocialempowermentoftheruralpoor

inoneofIndiaspooreststates,interveningwithcommunitiesthroughfourcomponents:institutional

capacitybuilding;socialdevelopment;microfinance;andlivelihoodspromotionandstrengthening.

(Tankha2012)

Jeevikaisambitious.Atitsendin2022,theprojectaimstoreach100%ofpeoplewhoarepoortothe

nakedeyeiv.Theprojectplanstoreachfivemillionfamiliesin44blocksofBihar,roughly4,000villages.

AccordingtoJeevikawebsite,Thecorestrategyoftheprogrammeistobuildvibrantcommunity

institutionsofwomen,whichthroughmembersaving,internallending,regularrepaymentand

economicactivitiesbecomeselfmanagedinstitutions.Selfhelpgroupsaretheprimarylevelcommunity

organization.From

this

base

structure,

Jeevika

has

elaborated

acomplex

management

and

credit

structurethatinvolvesVillageOrganizations,BlockLevelFederations,CommunityInvestmentFundsas

wellasbanklinkages.Eachrequiresdifferentrecordkeepingandadministration,withsomeoverseenby

staffandothersdevolvedtothevillagelevel.

III TheCBSGModelandChallengesAddressed

TheCBSGmodeladdressesmanykeychallengesofSHGs.Withoutastudytodeterminethedifferencein

householdimpactsbetweenCBSGsandSHGs,oracompleteunderstandingofcostsstructures,itis

difficulttoquantifybangforthebuck(unitofimpactperunitofcost)andcompare. But,atthisearly

stageit

appears

that

CBSGs

have

the

capacity

to

foster

financial

flexibility

and

social

inclusion

to

a

greaterdegreethanthatofferedbySHGs.

1. Theclarityoftheshareandpassbooksystemeliminatescomplicatedbookkeeping.

TheCBSGapproachusessimpleprocedurestoguideeveryCBSGmeeting(AllenandStaehle2008).

Meetingregularlytoissuemembersharesandtomakeloanseveryotherweek,theCBSGreturnsall

accumulatedfundsincludingincome(interestfeesandfines)tomembersaccordingtotheirshares.

BecauseCBSGsrequireonlypassbooksaswrittenrecordssomegroupsoptforsimpleledgers

participatinghouseholdsquicklyunderstandsaving,loan,andsharepurchaserules.Membersfindthe

sharesystemeasytounderstand,andarequicklyabletosetshareprices.Forexample,thevalueofone

sharemaybesettoanamountthatreflectswhatthepoorestormostcashvolatilemembercanafford

topurchase,say5rupees.

Duringeachmeeting,groupmembersknowexactlyhowmanyshareseachhaspurchasedandthusthe

worthofeach.Shouldamemberneedtoleavethegroup,hercapitalandreturnscanbecalculated

easilyfromherpassbook.


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2. Theflexibilityofthesharesystemmatchescashflowofmembers.

Membersmaypurchaseasfewasoneshareandasmanyasfive(somegroupssetthesharemaximum

ratehigher)andmayvarytheirpurchasefrommeetingtomeeting.Ifmemberincomeistypicallylowin

theseason

before

the

harvest,

members

purchase

fewer

shares.

After

the

harvest,

members

purchase

more.Eachmembercandecideateachmeetingwhathercapacityisandmakesharepurchases

accordingly.

Suchflexibilitytakesintoaccounttherealitiesofcashvolatilememberswhomaynotbeabletocommit

tosamesizesavingsthroughouttheyear,ortosavingsthatequalsthatofothermembers. It

addressesthechallengeofSHGsmentionedearlier:inanSHG,membersmisstheopportunitytoset

asidemoresavingsthanthedefinedsavingsrate.InaCBSGmemberscaneasilyconvertoccasional

householdsurplusesintoprofitableinvestments.

3.

The

periodic

share

out

eases

important

shuffling

and

reshuffling

of

membership.

Eachyear,theCBSGcallsinitloansfrommembers,makessureallinterest,feesandfinesarebrought

current.Itdistributescapitalincludingearningsbacktomembersaccordingtotheshareseachhas

purchasedduringtheyear.Membersmayimmediatelyinvesttheirshareoutsinanewcycleof

investmentandborrowing.However,manyclaimtheylikethelumpsumanduseittomakehome

improvements,topurchaseclothing,ortopayforanimportantmedicalprocedure,hirelabourtohelp

duringtheplantingseasonorpayschoolfees.

Besidesofferinganattractivelumpsumtoeachmember,thisregularclearingoftheCBSGfundallows

otherbenefitstooccur.First,unmarriedwomenmightjoinagroupforayearortwo.WhileanSHG

mightresistadmittinganunmarriedwomanduetothetroubleofcalculatingherdepositvalue,aCBSG

hasend

of

year

and

even

during

the

year

systems

in

place

to

allow

an

unmarried

woman

to

leave

the

group.WesawevidenceofthisnearPatna.

Second,aregularclearingofaccountsallowsnewmemberseasyentryintoanexistingCBSG.Theydo

notneedtomusteralargeentrysumtogainaccess.Theysimplyjointhegroupatthebeginningofa

freshcycle.Sucheaseofentryallowsmarriedwomennewtothevillagetojoinandmakesroomforlate

adopters.Italsomakesroomfordisgruntledorevenmarginalizedmemberstograciouslyexitthegroup

withtheirdignityandlocalrelationshipsintact.

CBSGswoulddowelltopayattentiontovariationsinTanzaniaontheshareoutmodelwheregroups

choosetoshareoutafterseveralyears,annuallydistributedividendsbasedonprofits,butallow

memberseasy

withdrawal

of

their

full

savings

ifmembers

give

amonths

notice.

New

mobile

technologyinEastAfricahasthepotentialtomakeeasycalculationofindividualmemberinterest

amounts

4. Nonautomaticcreditlinkagesallowmemberstomaximizehotmoney.

TheCBSGapproachacknowledgesthatnotallmoneyisthesame.Membersdividetheirthinkingabout


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whethermoneyishotorhardwonfromthriftorcoldandeasilywonfrominstitutionalsources

(Wilsonetall2010).Baksamoney,orboxmoney,isdearertomembersandmorelikelytobe

safeguardedthanexternalcredit.

Hotmoney

affords

members

two

important

advantages:

loans

from

the

corpus

are

more

flexible

than

externalloansandassuchcanmoreeasilyassignloanstopriorityuses. Plus,theycanretainthe

profitsandenjoytheprofitslaterasreturnoncapital.(Premchandar2009)

FacilitatorsoftheCBSGapproachunderstandthatmembersmayusefundsforlivelihoodactivitiessuch

asthepurchaseofafewchickensoragoat,butjustasoftenwillusefundstopurchasefoodorclothing,

ortopayschooltuition.Askingmembersofgroupstotakeontheburdenofdebtwhentheyhaveno

growingenterprisetosupportthatdebt,candamagethefinancialstatusofmemberhouseholds.

5. Thelackofametastructurepreventsburdensomeadministrativeactivities.

CBSGsarenotfinanciallyfederated,norclustered.Suchstructuresdetereasygroupformationand

dissolution.Theyaddlevelsofadministrationandbookkeepingthatmaybecostlyandwouldrender

manyactivitiesopaque,excepttothemostliteratemembers.

FacilitatorsofCBSGsdonotencouragememberstotakeontheburdenofmanaginggovernment

services.SHGs,oftenformedbygovernmentsandNGOs,dotakeontheseservices,thusshiftingapublic

sectorworkloadtotheSHGandbyextensiontoitsmembers.

TheAgaKhanFoundationanditspartnersrecognizethatsomewomenmightwanttheservices

providedbyvariousgovernmentschemeschanneledthroughSHGs.IfCBSGsseeaserviceopportunity,

theymayseizeitattheirdiscretion.CBSGmembersarewelcometojoinSHGstoreceiveadditional

services,but

are

not

required

to

do

so.

Our

research

shows

that

some

members

choose

to

be

in

multiple

groups,withtheCBSGservingacrucialnicheintransparent,efficient,andusefulfinancialservices,

particularlysavings.

6. Aseparatesocialfundhelpswithhouseholdemergencies.

TheCBSGapproachinstructsgroupstoconsiderthecreationofseparatesocialfund,akindofinsurance

formembers(Ledgerwood2013).Keptinsidethesamelockboxasthegroupinvestmentandloanfund,

thesocialfundtypicallygoestomembersinneedofsmallgrantstoaddresshouseholdemergencies.

CBSGsfundtheirsocialfundswithregular,separatecollections,withspecialcollectionsorsimplyby

channelinginterestincomeintoit.

Becausemoneyfromthesocialfundisusuallygiventomembersasagrant,thegroupcanskip

cumbersomerecordsonsocialfundactivities.Itcansimplycountitscashbalance.Suchafundallows

groupstohelpneedymemberswhomaynotbeabletorepayaloan,whilemaintainingaseparate,

healthycorpus.


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IV PromisingOpportunitiesforTheCBSGApproach1. NABARDsSHG2PoliciesandProductsareCBSGFriendly

Incorporatinglessons

its

first

phase

of

SHG

promotion

(here

called

SHG1),

NABARD

has

re

engineered

its

approachtoincorporatebothmoreflexiblefinancialoptionsforgroupsandindividualmembers.

First,NABARDhasremoveditsrequirementinSHG1whereanSHGhadtoguaranteeallbanklinked

loans,evenifjustafewmembersofthegroupborrowed.UnderSHG2,theentiregroupneednot

guaranteeabankloan.Smallersubgroups,orJLGs(jointliabilitygroups)mightborrow,withtheir

membersguaranteeingloansofJLG.ThoseinthelargerSHGorCBSGneednotbeatriskfortheloansof

theJLG.

Second,NABARDispioneeringtechnologyrelatedinitiativestoassistSHGswithrecordkeeping.Using

mobilehandsets,100SHGsinTamilNaduareabletorecordfinancialtransactionsintheirlocal

language.Mobile

phones

capture

financial

information

as

well

as

meeting

attendance

and

via

SMS,

everymemberreceivesaweeklyreport.Similarly,anotherpilotinWestBengalisusingaPOSdeviceto

capturemembersavings,borrowingandbankbalances. Thedeviceisalsoabletoinstantlyprinta

physicalrecordandcangeneratememberlevelandgrouplevelreports. (NABARD)

Iftechnologyviamobiledevicescouldenabletheprecisetrackingofindividualtransactions,thenaCBSG

wouldknowtheworthofitsgroupandeachofitsmembersatanygiventime.MorematureCBSGs

couldcashoutaportionoftheircorpuswhilebringingabalanceintothenextcycle.Thiswouldallow

thegrouptoprovideendofcycleorlongertermloans,whichmightbeusefulforlivestockfatteningand

reclaimingmortgagedland.

2.Aadhaar

Can

Offer

Individuals

in

CBSGs

Additional

Services

AadhaarisaninitiativeoftheGovernmentofIndiatopromotefinancialinclusioninallstates.Issuedby

theUniqueIdentificationAuthority,itisa12digitindividualidentificationnumberthatallows

individualstoeasilytransactwithbanksandbankingcorrespondents,todeposit,transferorreceive

electronicpaymentsincludingcashassociatedwithgovernmentbenefits(UIPAI).

Aadhaarmightbeagoodcomplementtomembersingroupswhoenjoythedisciplineandprecisionof

theirCBSG,butwhowouldalsoliketobankprivatelyusingtheconvenienceoftheirmobilephoneor

welllocatedcorrespondents. Infact,theregulationpermitslocalintermediariessuchaswomens

savingsgroupstoprovideservicestotheircommunities.


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11

V Conclusion

TheCBSGapproachbuildsonthephilosophyofearlypioneersintheSHGmovement.Itcanafford

stakeholdersintheSHGmovementtodayachancetorealizetheoriginalpromiseofthismovement:full

socialand

financial

inclusion.

Used

well,

elements

of

the

CBSG

approach

can

strengthen

SHG

practices.

Tooptimizegrouporganizingactivities,thefacilitatorsofSHGscanincorporateintotheirworkthe

elementsdescribedinthispaper.Traininggroupstokeepsimplerecords,toreplacesavingswithflexible

sharepurchase,toconductannualshareouts,andtoincludeasocialfund,isnotdifficult.Anditcan

leadtomoreautonomousgroupsthatofferversatileservicestotheirmemberships.Ininstanceswhere

convertingSHGstoCBSGsisdifficultforexampleincontextswhereexternalcreditormanagementhas

predeterminedtheoverallapproach SHGfacilitatorscanencourageSHGmemberstoform

additionalgroupsthatfollowtheCBSGapproach.Inthisway,memberscanchoosewhichgroupthey

belongtoandforwhichpurposes.


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12

References

Allen,Hugh,Staele,Mark(2008)VillageSavingsandLoanAssociations,APracticalGuide,Practical

ActionPublishing,

London

Ledgerwood,Joanna,Earne,Julie,NelsonCandace,eds.(2013)TheNewMicrofinanceHandbook,A

FinancialMarketSystemsPerspective,TheWorldBank,Washington,D.C.

NABARD(2012)StatusofmicroFinanceinIndia,20112012,NationalBankofAgricultureandRural

Development,Mumbai

Premchander,Smita,PrameelaV.Chidambaranathan,M,Jeyaseelan,L.(2009)MultipleMeaningsof

Money,HowWomenSeeMicrofinance,SAGEPublications,NewDelhi

Reddy,K.RajaandReddy,C.S.(2012)SelfHelpGroupsinIndia:AStudyonQualityandSustainability,

anENABLE

Publication,

Hyderabad,

India

Rutherford,StuartwithArora,Sukwinder(2009)ThePoorandTheirMoney,Microfinancefroma

TwentyfirstCenturyConsumerPerspective,PracticalActionPublishing,London

Sinha,Frances(2008)MicrofinanceSelfHelpGroupsinIndia,LivingUptoTheirPromise?Practical

ActionPublishing,London

Srinivasan,N.(2010)MicrofinanceinIndia,StateoftheSectorReport2010,ACCESSandSAGE

Publications,NewDelhi

Tankha,Ajay,

Banking

on

Self

Help

Groups,

Twenty

Years

On

(2012)

SAGE

Publications,

New

Delhi

UNICEF(2012)OverviewofInternalMigrationinIndia(reportaccessedMarch1,2013)

(UIPAI)UniqueIdentificationPlanningAuthorityofIndia,Aadhaar,availableonlineat

http://uidai.gov.in/aadhaar.html,accessedonMarch1,2012

Wilson,Kim,Harper,Malcolm,Griffith,Matthew,eds.FinancialPromiseforthePoor,HowGroupsBuild

Microsavings,KumarianPress,Sterling,Virginia


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i PartnersoftheTheAgaKhanFoundationinIndiaworkingonCBSGsincludeAKRSP,NIDAN,NavJagriti

andSakhi

ii FormoreonthedetailsoftheVSLAmethod,thebasisonwhichCBSGmodeloperates,seeAllenand

Staehle;for

guides

on

similar

models

see

www.savings

revolution.org

iii TheCBSGapproachtypicallydoesnotusethetermcorpustodescribedpooledsharepurchaseand

deposits.ItisusedinthepapertodrawsimilaritiesanddifferenceswiththeSHGmodel.iv InterviewwithRavinderNathChoudhary,DistrictProjectManager,December2012.

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