Micro-credit and mixed successes

The Andhra Pradesh government's rural micro-credit scheme for women is a successful model in poverty alleviation for poor women. Yet, questions about its efficacy in facilitating economic change and women's conscientisation remain.

THE Andhra Pradesh experience in rural micro-credit for women has gained national and international recognition as a success story in poverty alleviation and capacity building for poor women. The Government of Andhra Pradesh takes the credit for this achievement which it claims has the makings of the "largest organised anti-poverty initiative in the world" (see www.andhrapradesh.com). The figures are impressive. There are more than 55 lakh poor women in the State enrolled in over 4.23 lakh Self Help Groups (SHG). The average group corpus in 2001-02 was Rs.28,368. Although the average saving by an SHG member in the same year was as low as Rs.337, the measure of the scheme's success lies in the low default rate in loan repayment. Only 2.29 per cent of the total number of groups that were given credit assistance in 2001-02 defaulted on their repayment. There are notable success stories of individual groups whose entrepreneurial skills substantially raised the socio-economic profile of group members.

How has this extensive, and if official claims are to be believed, robust, network of women's groups fared during the severe drought that many districts of the State are currently in the grip of (Frontline, September 13)? Have SHGs been able to cushion the impact of drought by providing access to credit for poor women in needy times? Have they acted as restraints on migration, a common enough phenomenon even in 'normal' years in drought-prone districts? Have they played their envisaged role, as organisational units that can demand and access their entitlements such as social services, safe drinking water, shelter, and drought-related programmes and schemes? Their ability to act as shock absorbers in times of socio-economic crises would surely be a measure of the success of the scheme.

A quick survey of the functioning of a few SHGs in Anantapur, the most drought-prone district of Andhra Pradesh, was instructive. This year's meteorological drought has been severe. Against a normal rainfall of 64 mm in June and 67 mm in July, the district received only 38.3 mm and 20.5 mm in the same months this year. Last year, as on August 7 the district had received 69.2 mm of rainfall. This year the corresponding figure was just 22.1 mm. The failure of the rains in a district where agriculture is predominantly rain-fed has accentuated the features of distress and deprivation that are part and parcel of life here even in a 'normal' years. Sowing for the kharif crop was affected by the failure of the rains in June. Groundnut, the major crop, is normally sown on 18 lakh acres (about 7.3 lakh hectares). This year only an area of nine lakh acres was sown.

The new element in the micro-credit environment in Andhra Pradesh has been the dramatic increase in the availability of credit for SHGs, not only from various state agencies, non-governmental organisations, and funding organisations such as the United Nations Development Programme (UNDP) but also from commercial banks, which are today the biggest providers of credit to SHGs. When the scheme was first introduced, it was common for SHGs to turn defunct once they received a matching grant from the government which was distributed amongst group members. This does not appear to be the case today.

In 2001-02, in Anantapur district alone, commercial banks lent Rs.11.12 crores to 5,591 SHGs through NABARD (National Bank for Agricultural and Rural Development) credit-linkage. C. Suvarna, Project Director, District Rural Development Agency (DRDA), Anantapur, said: "NABARD, in order to provide an incentive for commercial banks to enter the picture, lends to them at 7 per cent interest. Banks in turn lend to SHGs at 13 per cent interest." She added: "Until last September, bankers were very reluctant to lend, as ours is a drought district. Now many banks are lending to us and there is healthy competition. There is a 95 per cent repayment rate in our district."

THE enormous effort that women make to repay their loans is a striking feature of the scheme. Although the purpose of saving here is to develop the habit of thrift and to offer credit to poor women to acquire income generating assets, in actuality most SHG members use the loans they receive for current expenditure. This is particularly so in a drought situation, especially amongst poorer women. This year the loan repayment schedules have imposed enormous burdens on women, who work harder and deny themselves even food in order to make the repayments. With the virtual collapse of the public distribution system (PDS), the steep rise in the costs of cultivation and the scarcity of agricultural jobs owing to the near failure of this year's kharif crop, it is possible that a large number of SHGs are likely to default in their loan repayments.

"All of us in my group spent the loan on our day-to-day expenses, although there are three women in other groups who bought cows and repaid their loan," said Nallamma, a group leader of one of four SHGs in the Scheduled Caste colony of Bukkacherla village in Rapthadu mandal. The kharif sowing did not take place in this mandal except in small bore-well irrigated pockets. Nallamma has been the leader of the 14-member group since its formation six years ago. Her group has received two bank loans, one for Rs.70,000 and another for Rs.1.2 lakhs. The amounts were distributed equally amongst group members. Hence over the course of the last three to four years, each member of the group has received a total of Rs.15,000 in two instalments. The group members make a monthly repayment of Rs.350, of which Rs.300 is towards loan repayment, while Rs.50 is their monthly contribution. They repay their loan at an interest of 2 per cent a month, a near-usurious rate that banks justify by arguing that it is lower than interest rates in the informal credit market, which is often as high as 4 per cent a month.

The minutes book of Nallamma's group shows that they have been regular with their meetings and their monthly payments. However, group members told Frontline how difficult it was to make the repayment, particularly in times like the present. Yet they display an extraordinary commitment to make their monthly repayment. "We must walk 10 km every day for work, at Rs.20 a day, and even that is not regular. We must repay somehow, even if we don't eat," said Lakshmidevi. Many of the women in the SHG expressed the view that once the amount was repaid, the SHG should be wound up. The women view the group as a conduit for credit and little else. However, the SHG meets only a small part of their credit needs and it is to the moneylender that they sometimes turn to.

Saraswathi is the 'grama jyothi' (the government-appointed animator who organises and coordinates the activities of the groups in a village) for Gandlaparti village in Rapthadu mandal. She has studied up to Standard X and took on the responsibility six months ago. According to Saraswathi, there were only six regular groups when she first became a grama jyothi, but there were eight groups now and many more women want to join. Six groups have got matching grants of between Rs.10,000 and Rs.25,000 apart from bank loans ranging from Rs.40,000 to Rs.1.10 lakhs. Saraswathi views the success of the SHG movement and her own success as an animator as being entirely dependent on other issues over which she and the group members have no control. She said: "If there is work, then people pay regularly. I want to improve the group, but in these difficult days I feel things are once again sliding backwards."

D. Gowramma, an SHG group leader in the same village, echoes Saraswathi's sentiments. Her group got Rs.15,000 as a matching grant and Rs.1.10 lakh as loan from the Anantapur Grameena Bank a year ago. Each member got Rs.10,000, and they are now repaying Rs.250 a month. Most of the members are from land-holding families and are relatively better off. They utilise their loans to buy milch cows or to invest in small ventures such as tea shops, vegetable shops and cloth shops. However, they still find repayment very difficult this year. Gowramma said: "No one has paid this month. There is no work, how can we pay? Many women just want to wind up the group." Muthyalamma, group leader of another SHG in the same village, said that ten months ago her group members received a loan of Rs.1,980 each. "In my group four members just used the amount for their daily consumption expenditure. We too are finding repayment very difficult this year." Prabhavati, a group member, recently sold her cow, which she had bought with a loan from her SHG. "There is no fodder in the village, and people have stopped drinking milk," she said. Narayanamma of the same group spoke of the difficulties in repaying debts. She said: "Wage rates are Rs.20 a day. Electricity bills amount to Rs.160 for two months and if you have an agricultural pump set, then you need to spend at least Rs.500 for two months in electricity costs. The connection in my house was removed as I could not pay the bill. In our village the electricity officials come with the police to recover costs, or disconnect our lines for non-payment." In the Scheduled Caste colony of the village, Lingamakka, the group leader of an SHG, said that her group had wound up because for the last six months no one had been able to make their monthly contributions, let alone repay loans.

SHGs have become convenient units of women's mobilisation by the government and political parties. SHG group members are routinely rounded up to fill up pandals and halls for government- sponsored campaigns, and even for political meetings.

The creation of the post of grama jyothi is just one of the recent steps taken by the State administration to strengthen the SHGs. This part-time position is paid for by the yearly contributions of the SHGs. Suvarna said: "This has not been an easy task but I am confident that it will work. These animators report to us on defaulting or sick groups, and we try to see why this happens. Once the loan is repaid the banker has to increase the amount. Now even poor SHGs are getting loans without collateral, which shows the bankers confidence." The administration has brought 41 out of 63 mandals in Anantapur district under the District Poverty Initiative Programme, which is now trying to identify and bring the poorest sections of women into the scheme. SHGs are divided into categories A,B and C on the basis of their performance on five counts, namely, regularity in holding weekly meetings, regular savings, internal lending, repayment within the stipulated time and proper book-keeping. According to official estimates, in Anantapur, in 2001, while 42.65 per cent of SHGs came in the A category, 39.87 came in B and 17.48 in C.

The remarkable commitment shown by women, despite the poverty and deprivation in their lives, towards repayment of their loans is the basis for the expansion of the micro-credit movement. Yet in the present milieu, the role of SHGs is circumscribed. They are basically structures that facilitate credit disbursals to poor women who, in the majority of the groups, spend it on the immediate needs of the family. For SHGs to act as agencies of poverty alleviation and "empowerment", there needs to be a far more supportive environment. Compounding the enormous iniquities of class and caste in villages are measures that have sharply eroded living standards, namely, a shrinking PDS, increasing costs of power, fertilizers and seeds, and falling prices of agricultural commodities. Under these circumstances, it would be unrealistic to expect SHGs to act as safety nets in times of drought and as agents of economic change and women's conscientisation in 'normal' times.