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«Greenwich Academic Literature Archive (GALA) Citation: Adolph, Barbara (2003) The role of self-help groups in rural non-farm employment. [Working ...»

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Model – 1: In this model, the bank itself acts as a Self Help Group Promoting Institution (SHPI). It takes initiatives in forming the groups, nurtures them over a period of time and

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Model – 2: In this model, groups are formed by NGOs (in most of the cases) or by government agencies. The groups are nurtured and trained by these agencies. The bank then provides credit directly to the SHGs, after observing their operations and maturity to absorb credit. While the bank provides loans to the groups directly, the facilitating agencies continue their interactions with the SHGs. Most linkage experiences begin with this model with NGOs playing a major role. This model has also been popular and more acceptable to banks, as some of the difficult functions of social dynamics are externalised. About 75% of SHGs and 78% of loan amounts are using this model.

Model – 3: Due to various reasons, banks in some areas are not in a position to even finance SHGs promoted and nurtured by other agencies. In such cases, the NGOs act as both facilitators and micro- finance intermediaries. First, they promote the groups, nurture and train them and then approach banks for bulk loans for on-lending to the SHGs. About 9% of SHGs and 13% of loan amounts are using this model.

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But banks are not the only source of access to capital for SHGs. The UNDP funded South Asia Poverty Alleviation Programme facilitated self- help groups to access the revolving fund from the District Rural Development Agency (DRDA) under the DWCRA programme. By 1998, Rs. 12.35 million (nearly US$ 300,000) of this fund has been accessed by the groups.

6 SHGs have also secured significant amounts from NGOs, foundatio ns and voluntary organisations. (http://www.sapap.net/pub/regrpt98/chap01.htm) It is clear that SHGs are emerging as a principal institutional arrangement for rural women, allowing them to access services that would otherwise not be available to them (including, e.g., life insurances - see Box 2). But how does access to banking services and financial capital contribute to RNFE? The next section will explo re how SHG members use their financial resources, and whether this results in substantial RNFE being created.

Box 2 Life insurances for self-help group members The United India Insurance company has designed two PLLIs (personal line life insurances) for women in rural areas. The company will be targeting self-help groups, of which there are around 200,000 in the country, with 15-20 women in a group. The two policies are (1) the Mother Teresa Women & Children Policy, with the aim of giving to the woman in the event of accidental death of her husband and to support her minor children in the event of her death, and (2) the Unimicro Health Scheme, giving personal accident and hospitalisation covers besides cover for damage to dwelling due to fire and allied perils.

Source: http://www.hinduonnet.com/2002/12/05/stories/2002120501172100.htm ` 4 Use of micro-credit by SHGs in RNFE While access to financial capital is a pre-requisite to enterprise development and income generation, they are insufficient on their own to generate RNFE. Entrepreneurial skills are essential in order to assist people to make use of market opportunities. And obviously there need to be accessible markets for the goods and services offered.

4.1 Training and capacity building Realising this, many NGOs, government programs and micro- finance institutions organise training programmes for SHG members and leaders. There are basically two types of


(a) Entrepreneurial training in skills (e.g. basic book-keeping, accounting and business planning) required in setting up a small business, and (b) Technical training in skills required for a particular business.

Most NGOs and government programs undertake the first type of training, often through a training- for-trainers mode, whereby sangha / SHG group leaders or mobilisers are trained, who then in turn train SHG members. While the emphasis of the training varies with the particular objectives of the programme, it generally covers also issues such as dealing with government agencies tha t support business development, and confidence building measures.

The second type of training is geared towards a particular enterprise or business, often determined by the interests of the SHG initiators. The aims are to ensure that group members engage in economically sound and technically feasible enterprises, which have been specifically developed for a particular target group. Examples are the 'Stree Shakti' programme in the dairy cooperative sector in Madya Pradesh (see Sardana 2002), the Training- cum-Employment Programme for Women called Women's Economic Programme financed by NORAD http://www.newdelhi.mfa.no/Development+Cooperation/Default.htm#Women), the SwaShakti Project - a World Bank and International Fund for Agricultural Development 7 supported project (http://wcd.nic.in/women.htm#ssp), Rashtriya Mahila Kosh (http://www.empowering-women.com/schemedetails.asp?lngSchemeID=77) and others.

It is not clear what proportion of the 8 million SHG members in India have benefited from such training, and what proportion of trainees has been able to make use of this training by starting a micro-enterprise or income generating activity. Obviously training alone is not enough to ensure that group members take up IGAs - their success depends also on markets for the services and goods produced.

4.2 Marketing Hofstede et al. 1996 argue that working in remote villages far away from market centres limits the scope for identifying and initiating viable income generating activities. IGAs do not automatically bring overall economic development, but they need markets where people with disposable cash will buy goods and services. Therefore it is recommended that programmes should focus more on promoting IGAs near markets in semi- urban areas, market centres and larger villages. Most programmes appear to have developed policies to concentrate primarily on organizing the poor through the SHG mechanism. The savings and credit mechanism promoted can not, in itself, be seen as an instrument or mechanism to promote economic activities.

To be effective in promoting economic activities the S/C programmes at the base layer (e.g.

at SHG level) must be accompanied by a secondary intervention strategy. Such a second layer can be in the form of a credit mechanism that has been added on to the primary S/C mechanism, but can also be in the form of other business promotion programmes such as marketing assistance of business advisory services and technical (skills) training.

Following a minimalist development approach for economic activities marketing assistance seems to be an effective tool. When it comes to promoting the generation of income and jobs for the very poor it can be argued that the organizing and running of the marketing function can be taken up by the COs without demanding (full) participation by the target group in the

organization and operations itself. Satyamurti and Haokip 2002 noted:

"It is also important to design background interventions that build the market for micro finance clients. Such interventions can range from building infrastructure to opening up new markets for the produce of the poor to providing business development services. Often these interventions will create conditions and opportunities for micro finance and not the other way round. What needs to be avoided is directional use of micro finance to sort out developmental challenges in situations where the basis of peoples' livelihood is destroyed."

There are two issues related to marketing that are relevant for SHGs:

(a) The marketability of the product or service provided or produced by the group, and (b) Market access.

Both are complementary, and initiatives in India have attempted to address both by training SHGs in producing high quality produce for which there is a market, and by facilitating market access.

One of the emerging initiatives that support SHGs in marketing their produce is the DWCRA programme in Andhra Pradesh. Marketing support is provided to the SHGs through DWCRA 8 Bazaars (Market outlets), which have been set up in all the districts, and a permanent DWCRA Bazaar is nearing completion at Hyderabad. Products worth more than Rs.100 crores were sold through DWCRA Bazaars in the last two years. Training and Technology Development Centres (TTDC) have been established in each district to introduce innovative technologies for the qualitative improvement of products made by the SHGs. The SHGs in the districts are assisted to develop branding of their products and women are encouraged to participate in fairs taking place at national level and in other states. Leading super bazaars like Food World, Thrinethra super market came forward to tie up with SHGs to market DWCRA products. For some DWCRA products the demand is very high, for example pickle s producing SHGs of Guntur district got orders worth Rs 6.00 lakhs, and lace groups of West Godavari district got export orders. (http://www.ap.nic.in/dwcra/) Prakash and Nehru (1998) describe the initiative of the Kerala Horticulture Development Programme that was set up in co-operation between the European Union and the Government of Kerala in 1993. The programme builds on SHGs, which select Master Farmers who are trained and act as facilitators. Besides horticultural crop production, the programme also assists SHGs in processing and marketing of products. The marketing infrastructure at site level include establishing field centres for bulking the produce from 10-15 SHGs. The concept of these centres envisages creating farmers' markets and benefiting from agglomeration advantages - both in terms of sale to wholesalers and commission agents, and in terms of market information. The programme is considered a success in bringing SHGs closer to the market.

There are a number of examples whereby SHGs are producing crafts for both the Indian market and export - or even for sale via the Internet. One such initiative is "GlobalMarketplace.Org", a dot com company that sells handicrafts produced by SHGs in India through a number of non-profit community development organisations. The purpose is to reduce poverty around the world by selling local village crafts and clothing at a fair price via the Online Global Marketplace and to return as much of the sales price as possible to the local artist (see http://www.globalmarketplace.org/cmffromindia.html).

Handicrafts are also produc ed by the SHGs supported by NEED (Network of Entrepreneurship and Economic Development), a Lucknow-based NGO. NEED promotes SHGs of poor women through a system of micro- finance and promoting entrepreneurial activities. Additionally, the organisation attempts to mobilize communities to address social issues and create community institutions that can meet the needs of citizens. NEED defined a comprehensive training model called "Entrepreneurship Linked Income Generation for Self Employment Program" (EIGSEP). This program is a series of 6 flexible modules that can be used as per the needs of village women and men who desire advanced entrepreneurial training. NEED has published learning documentation and conducts training programs for NGOs, Governmental departments, banks and SHG leaders (http://www.indev.nic.in/need/activities.html).

In Goa, the District Rural Development Agency is maintaining a web site where SHGs can present and market their produce, most of which is again handicraft. DRDA also organises exhibitions and craft fairs with the aim of promoting traditional crafts and linking producers to consumers. It recognises that marketing is a key constraints to small-scale producers.


9 Helping SHGs in getting contracts to supply a specific quantity of produce to a buyer can also help in overcoming marketing constraints. Some NGOs and government agencies have actively pursued this road, e.g. by purchasing chalk for local schools from SHGs that have been trained in chalk manufacturing (see http://www.youhelpindia.org/edunews/edunews_jul2002/edunews_jul2002_7.html).

While these examples are encouraging, it is again not clear how many SHGs are benefiting from them. In India, unlike e.g. in large parts of Africa, it is still not fully acceptable by rural society that women are actively engaged in trade and other non- farm enterprises, especially if this implies travelling and dealing with male middlemen. As a result, women depend much more on SHGs than they do in Africa, whe re the bulk of self-employment is through individual women using informal channels of credit and marketing. As this option is not open for the majority of Indian women, the need to link SHGs to markets through formal channels is greater.

It has also been pointed out that access, ownership and control of productive resources are crucial in determining the potential of women to produce marketable products and services.

Kay 2002 says that "Microcredit schemes have not been able to lift women out of abject poverty as they cannot transform social relations and the structural causes of poverty". She stresses the importance of enabling the poor to own and operate enterprises to add value to the primary products they usually produce (e.g. dairy co-operatives). According to Kay, "social mobilisation requires broader conceptualisation and may need the harnessing of the collective strength of self-help groups in a federation." The following section discusses ways of federating SHGs, based on experiences in different Indian states.

5 Scaling up: Apex bodies and cluster development Marketing initiatives like the ones described above cannot work with only one SHG - they require that groups are organised at a higher level. Forming federations or apex bodies of SHGs has been promoted by NGOs and government programs for a number of years, with the main aim of strengthening rural people's participation in decisions taken outside their own community.

Generally 8-10 individual SHGs are federated into a village organisation, with the aim of addressing the commonality of issues at a larger forum. The management of the affairs of the VO is looked after by the VO leaders selected or elected by the people. The VO monitors the function of SHGs, helps strengthen them, and provides access to credit by acting as a link agency to the banks. VOs are also responsible for organising training to the SHG members.

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