Tag Archives: Self Help Groups

Stories of households in poverty [4]: Household of Mathiben Garwal at Kankari Dungari village, district Dahod, Gujarat

Some time ago I studied some households living in multi-dimensional poverty conditions in various states. I spent a considerable amount of time with all the members of the families, and accompanied working members to their places of work. I tried to understand their desperate livelihood strategies, their external environment, their needs for financial services, and their access to social protection. I am sharing some selected stories here.

Fourth of such stories relates to the household of Mathiben Garwal. Mathiben does not know her age, but suggests on persistent inquiry that she may be about 40 years of age. She lives with her husband, Savjibhai, three daughters, aged 16, 13 and nine years, and two sons, aged 20 and five years. She has one more daughter who is married and lives in another village.

 Human capital

Mathiben and her husband are illiterate. Their elder son studied up to third standard and now migrates to Vadodara for work. Younger one is not admitted in the school so far. Daughters never went to school at all.

Dwelling and assets

Mathiben’s family lives in a house made of mud and bricks. It does not have a toilet but has an electricity connection with two plug points. They have bulbs but no fan; have some basic kitchen utensils and six wooden cots. They do not have a cycle, radio or a television. Mathiben cooks on a clay chulha (stove) with firewood collected by her and the children during the day.

Her household has agricultural land but neither she nor her husband knows its exact measurement. She points out this is the land you see[1]. Records show that she has six bighas of land. Her husband’s elder brother expired some year back without getting married so Savjibhai inherited his share also. Their entire land is at a higher level with low soil depth due to continued water and wind erosion. There is no means of irrigation and they grow only maize during monsoon. Earlier when Mathiben was also migrating with her husband they did not have any livestock but they acquired a buffalo when she stopped migrating. They do not have bullocks and hire bullocks from neighbours to till their land.

Livelihood strategies

As the agriculture is rain-fed and there is no other work in the village, Savjibhai migrates to Vadodara to work as unskilled wage laborer on construction sites along with his elder son. His son is also unskilled and seeks casual employment at Vadodara. They remain in Vadodara as long as they keep getting work. Duration of their stay at Vadodara can extend up to five-six months. Sometimes they have to come back in fifteen days only. They however make sure to be present at the time of sowing and harvesting their fields. Mathiben also used to accompany her husband earlier but does not do so any longer, as her health does not permit her to undertake strenuous work in Vadodara. She looks after the agriculture in absence of her husband, tends to the cow and collects firewood with the help of her children. Her husband and the son get INR 100 to INR 120 per day depending upon their bargaining situation. After a month of stay they are able to bring home about INR 1,500 to 2,000 as they get work for about fifteen days on an average in a normal month and have to spend on their food while staying at Vadodara.

Stay at Vadodara is treacherous. I visited their make-shift colony at Vadodara which is on an open space belonging to the Municipal Corporation of Vadodara. Hundreds of tribal families migrating from different villages share that space with about 25 families from Kankari Dungari village. The adult members leave for work or in search of work during the day, while their children play in the dirt and garbage of the colony. Elder children also look after their younger siblings, feed them during the day and collect firewood from far away places for cooking. None of these children goes to school which is anyway neither feasible nor possible in the given conditions.

All the families live in a small patch of land enclosed by polythene and jute sheets.  Even the roofs do not have any hard material.  The entire structure is supported by the wooden sticks. The structure is obviously not suitable for a human habitation in any weather. There is a municipal water connection for one building under construction on one side of their colony, which is used by all the families staying there to meet their drinking, bathing and cleaning needs. The colony does not have any toilet or bathroom facilities and the inhabitants use one corner of the land plot for these purposes, which makes the entire place even more inhabitable. Women have to finish off their morning routine while it is still dark. They also have to take bath hiding themselves behind their houses in the open.

None of the families staying in the area has been issued ration cards and they have to depend on the local shop keepers for procuring their daily provisions. They do not avail of medical facilities at government hospitals, as according to them whenever they tried to do that, they were made to run around from pillar to post, and did not get any medicine even after wasting much of their time. They go to the private clinics when they fall sick and have to spend a large part of their earnings on their healthcare. Their unhygienic living conditions appear to be one of the major reasons for their falling sick.

Food security and vulnerability

As their agricultural land produces only one crop, it does not meet the food requirements of the household. According to Mathiben that is precisely the reason why her husband migrates along with her son. Maize produced at the field suffices for the household food grain requirements for about eight months. Sometimes when there is an emergency they have to sell maize after harvesting and purchase later at more than double the price. Mathiben had to resort to selling maize recently when her younger son got sick. She did not have money and her husband and the elder son were in Vadodara. She had to spend about INR 2,000 on his treatment.

As two members of the household migrate to earn and the family has access to the subsidized Public Distribution System (PDS) food, there has been no episode of hunger in recent past.

Other consumptions and expenditures

Agricultural land only produces maize and hence Mathiben needs to purchase other provisions such as lentils, vegetables, cooking oil, sugar, salt, and spices from the market. She buys smaller quantities of the provisions at the village itself. For larger quantities she travels to Limkheda paying INR 7 as one-way fare.

They buy clothes for children and themselves during the marriage season and spend about INR 2,000 at a time. The major expense is however on chandlo, which is about INR 10,000 every year. Other expenses include buying shoes, soap, hair oil, tobacco and alcohol. They did not report any substantial expenditure on entertainment although the elder son gets to watch some movies in Vadodara.

 Significant events and income shocks

Mathiben’s household did not experience any major income shock in the recent years. She managed the marriage of her daughter without having to borrow money from outside.

Financial needs

Whenever the father and the son come back from Vadodara, they have cash and for want of any suitable savings mechanism they keep it at home. Their expenditures are generally small and frequent, excepting on medical care and purchasing food grains in bulk. Practice of keeping cash at home thus addresses their liquidity requirements but is very risky at the same time, as the nature of construction of their house does not make it a safe place for stashing cash. Being illiterate, the formal savings mechanisms, especially the banks, intimidate them. Even if they overcome their inhibitions and deposit money in the banks, high frequency of their transactions will entail significant loss of their working hours. They therefore need a savings mechanism where they can frequently deposit and withdraw small sums without having to waste their working hours.

They also need to borrow money at regular intervals for various purposes. What was however remarkable is that the villagers do not want to talk about their debts. They also do not view their debt in totality. Debt does not seem to be an independent entity but appears to be subordinated to its purpose. Inquiring about debt in itself generally evokes a negative response. It is only when the question is about the amount of debt for a particular purpose; the amount of debt is revealed but is limited to that particular purpose. Unless one exhausts all the purposes, the situation of indebtedness is not understood totally. Indebtedness situation of a household starts becoming clear only after the first interview, and its fuller assessment requires at least two to three subsequent interviews. Loans may be taken against some collateral or without collateral. Lending rates for collaterized loans range from 36% to 60% per annum, while there were instances of some non-collaterized loans attracting an interest rate of 150% per annum. At least one instance was reported with an interest of 25% per month on a loan amount of INR 2,000 availed for medical purposes.

The most important purpose for obtaining a loan is a medical condition followed by meeting the expenses on chandlo[2], agricultural investments and the expenses on life-cycle events such as marriages and deaths. Mathiben’s household spends about INR 10,000 on chandlo every year. Whenever they do not have cash to pay chandlo, they borrow it from outside. Mathiben had borrowed INR 1,500 just before my first visit to her household to pay for chandlo, which was organised by her immediate neighbor to construct his house. She however did not need to borrow any money for the marriage of her daughter and it was managed with the amount of chandlo and the dowry her daughter received. She normally borrows money from the shopkeepers at Limkheda. Responding to a question as to why she does not borrow from a bank, she mentioned that banks give loans against the jewellery as collateral and she does not have jewellery to offer to the banks. She also felt that obtaining a loan from a bank is a big hassle and the banks make people run around. Their situation may however immensely improve if they have an access to a reliable and reasonably priced credit mechanism.

The earning members of the household travel far for their work and are also engaged in employments not providing them with any security. They therefore need to be insured against accidents and death. The household also needs suitable insurance services providing coverage to their health and assets. As Mathiben’s husband and son migrate out of their village, they need reliable remittance services so that they do not have to personally come back to the village for delivering money to her.

Access to financial services and microfinance

A self help group (SHG) was earlier functioning in the village that had membership in her locality. She was however not a member of the SHG as according to her, only old women were made members. She further mentions that the SHG could not function for a long time as its leaders took away the savings of the members. All its activities were controlled by Mohanbhai[3], husband of the president, as he was the only one who was educated (till class 7). The SHG received a subsidized loan for buying a grain grinder which was installed at the president’s house. She promised to serve the members at half the usual rate but did not keep her promise.

Savjibhai was persuaded in 2002 by an agent of life insurnace corporation (LIC) at Vadodara to purchase a life insurance policy carrying a premium of INR 900 per annum. He deposited the amount for two years but did not continue it as he could not arrange for the premium amount timely. In the process he lost out INR 1,800 in addition to the insurance cover. Whenever he and his son have spare money at Vadodara, they keep it with their employers as it is not safe to keep it at their place in Vadodara. They get it back when coming back to their village. Sometimes they lose their money (they remember losing it on three occasions earlier, when the employers refused to accept that the money was kept with them) but keep following the same mechanism for want of any alternative[4]. They do not explore the option of saving their money in a bank at Vadodara as they feel that no bank will open their account at Vadodara. On probing deeper, Savjibhai admits that he would not want to open an account at Vadodara as he does not know and trust anybody there other than his employers. Being illiterate, he can only transact with people who he trusts and not on the basis of some pieces of paper. Savjibhai is however willing to put his savings in a bank if it is available in his village and the product suits his requirements. He feels comfortable with the post-office as he knows the postal personnel in the neighboring village Dantia. He however wants either the post-office to readjust its working hours or collect his savings at his doorstep.

Social protection programmes available to the household

Mathiben’s household has been issued an Antyodaya ration card. She is accordingly entitled to receive 16.7 kg wheat flour and 16 kg rice on payment of INR 86. According to her, she only gets 5 kg of rice. Moreover, the wheat flour she gets most often smells foul and is infested with insects. She feeds it to her buffalo. She has an option of buying 3 to 4 pouches of edible oil but is able to procure only 1 or 2 pouches, as she does not have enough money to buy it at one go. One pouch costs her INR 45 at the PDS shop, while it costs about INR 90 in the open market.

Mathiben, her husband and her son have been issued job cards under national rural employment guarantee program (MGNREGA) but they had got no employment till the time of my last visit to her household. Four items of work were sanctioned in the village under the programme and were ongoing during my visit to the village but they all related to digging wells at private fields. The concerned field-owners themselves decide who to be employed for work. They therefore usually employ people from their own households and their neighbors. Mathiben mentions that ‘the employment goes to the family members only; who will call us’. She is not aware of the provisions of guaranteed employment under the program.

Additional financial needs generated by social protection programmes

Mathiben is not able to procure her entitled quantity of edible oil for want of money and she has to buy the additional quantity at almost double rate from the open market. Thus she needs access to small credit to be able to claim her entitlement in totality.

 Leveraging on their social capital to meet financial needs

Mathiben could marry off her daughter without having to borrow money from outside with the help of chandlo amount she received from her community members and the dowry she received from the groom’s family. She is also not unduly bothered about arranging the money for the marriages of her other children unlike her counterparts in UP. Institution of chandlo thus takes care of the financial needs for the lifecycle events concerning her household.

[1] Most households in tribal villages of Dahod district live near or inside their fields.

[2] Chandlo: a community financial institution in tribal areas of Gujarat.

Life-cycle events such as marriages and deaths entail large amounts of expenditure but in most cases it gets managed with the money collected through a custom called chandlo vidhi. Chandlo is monetary contribution that relatives and other community members make towards the expenditure a household is incurring on a funeral, marriage, or other social occasions. Although such a custom is prevalent in other parts of India, but it is always at a much smaller scale. Here, the contribution may be as high as INR 15,000 on a single occasion.

Chandlo seems to be the community’s response to a deficient financial-especially savings and credit-infrastructure, based on trust and mutual dependence. It harnesses the social capital of the localized tribal community to facilitate all its members to adequately celebrate social occasions. In effect, it works as a savings mechanism to be encashed at the time of need for a lump sum. If some households do not have a social occasion for about five-six years, they organize a chandlo with some other purpose, mostly construction or upgradation of their house, to recover the money they contributed as chandlo to other households.

 It has, however, started getting oppressive now with conditionalities such as the recipient having to pay double of the amount she received for her chandlo, to the chandlo– organizing household. Such amounts over a period of time become very large and many households have to resort to borrowings to be able to give chandlo. At least five relatively better off respondents reported that they migrate to earn money to be able to pay chandlo. If it was not for chandlo, they would never migrate. Continuously increasing amounts of chandlo also raises the levels of expenditure incurred on their life-cycle events. Some resistance seems to be building up against the oppressive forms of chandlo.

[3] He has since expired. Interestingly, nobody in the village was willing to speak about the SHG and Mathiben was the first person to provide some information that was corroborated by the others in subsequent interviews. The closure of the SHG seems to have generated substantial amount of suspicion and distrust within the otherwise largely closely-knit village community, and they do not wish to acknowledge or talk about it.

[4] They are vulnerable to be cheated in other ways too. They are illiterate and save different amounts irregularly. In case of taking their money back after four-five months, it would be difficult to accurately calculate their total savings. A dishonest employer may be tempted to take advantage of this situation.



Stories of households in poverty [3]: Household of Meena Devi at Barakheda village, district Kanpur Dehat, Uttar Pradesh

Some time ago I studied some households living in multi-dimensional poverty conditions in various states. I spent a considerable amount of time with all the members of the families, and accompanied working members to their places of work. I tried to understand their desperate livelihood strategies, their external environment, their needs for financial services, and their access to social protection. I am sharing some selected stories here.

Third of such stories relates to the household of Meena Devi, 47, who lives with her husband Mulchand, 50, and seven children. Sons are 26, 13 and 10 years old, while daughters are of 27, 20, 18 and 14 years. Only the eldest daughter is married. However, she remains sick and has been left by her in-laws at Meena’s place. Meena belongs to Katheriya, one of the Scheduled Castes.

Human capital development

As Meena was born and brought up at a town, Kanpur, she has studied until eighth standard and is the one of the most educated women in the village. In fact, none of the village women of her age and above is literate. She wants to educate her children properly but is unable to do that for want of money. Two younger sons and the youngest daughter currently go to the government school in the neighboring village. The villagers are not happy with the quality of education at the school and if they could afford, they would like to send their children to the private school located about 3.5 km from the village. Her daughter, currently in eighth standard could not recite multiplication table beyond five and could not read her Hindi textbook properly. None of her other children has studied beyond eighth standard. Nobody in her next generation has developed or appears to be developing their human capital sufficiently to rise beyond poverty despite the fact that she is one of the most educated women in the village.

Dwelling and assets

Meena’s family lives in a ramshackled one-room mud house. They have very basic utensils, mostly made of aluminium as they are the cheapest. They cook on a clay chulha (stove) with firewood collected by the children during the day. The house does not have an electricity connection or a toilet. They have four wooden cots in the name of furniture. Her husband owns a bicycle which he uses for commuting to his workplace.

Her father-in-law owns five bighas of ancestral land. He has five sons including Meena’s husband. They do not own any means to till the land and have to hire a tractor for the purpose. Hiring a tractor costs INR 300 a bigha. If they have money, they cultivate the land, otherwise it remains barren. Credit is not easily available and that is why the entire patch of land was left barren during Rabi harvesting season immediately preceding my visit. Moreover, productivity of the land has gone down over the years due to indiscriminate use of high-yielding variety of seeds, irrigation, chemical fertilizers and pesticides in the area. The land now needs more fertilizers and water to maintain its productivity. There is never enough money available at the household level to apply fertilizers to the field even when they are able to manage the money for tilling and seeds. Whenever there is yield from the fields, it is distributed among all his sons equally.

Her family used to have a cow but it died about one and a half years back due to diarrhea. She was also keeping goats and had two goats and a he-goat. They all died about six months back again due to diarrhea. They spent about INR 300 in their treatment but they could not be saved. She has now stopped keeping livestock.

Livelihood strategies

Her husband works in a gas plant at Panaki, about 15 km from the village. He was hired through a contractor and gets INR 80 per day for week days. He is not paid for weekly offs and has no security on the job. He is not covered under any labor regulations and represents the massively growing tribe of informalized workers in the formal sector of economy. He commutes to his workplace on his bicycle and has developed various ailments including swelling in his testicles. The doctors are suggesting for an operation but she does not want him to be operated at a government hospital. She and the other villagers feel that the patients are not cared for in the government hospitals. She does not know the expenditure involved with such operations at a private hospital but estimates it to be somewhere between INR 10,000 and INR 15,000. In spite of being hard-pressed for money, people do not want to take risk with their health for obvious reasons, and prefer private hospitals and the doctors over the government ones. They feel that if they have money or connections, they will be treated well at government hospitals. Private doctors behave much better with them and are more responsive to their queries and concerns. It evokes a feeling of trust among them and they think that they are treated better at private facilities. Most respondents’ initial remarks on the issue always centered on them not being cared well in government hospitals and not on not being treated well. Not being treated well always comes during detailed discussions.

Meena is however scared for him as he is very weak and may not be able to cope well with the operation. Arranging for that kind of money is a major issue as they do not have any access to the cheap credit. Moreover, after the operation, he will not be able to ride the bicycle for at least six months, according to the doctors. That would effectively cost him his job and that the family can hardly afford, especially when they need money in lump sums to get their children married.

Her elder son also goes to nearby towns of Panaki, Kalyanpur and Kanpur in search of work, as there is no employment opportunity in or around the village, and agricultural land is also not available on sharecropping. Meena is concerned for him as she feels that he is very naive and gets cheated while receiving his wages. He is also unable to negotiate for higher wages. He never gets more than 10 to 12 days of work and never earns more than INR 1,000 a month. Her other sons and daughters also work as agricultural laborers during harvesting season that gives them food grains to last two to three months every year. The younger ones collect 70 to 80 kg of potatoes from different fields. Traditionally, after harvesting the potatoes, the landowners allow others to come to their fields and take away the leftovers.

Meena’s parental house is at Kanpur and she stayed there before her marriage. Her father passed away and her brothers left her mother alone. She got her hand fractured and Meena had to stay with her to look after her. As they needed money, Meena started to look for some work based on the basic skills of midwifery and massaging the new mothers and their children that she had acquired as part of the customs of her caste. As she continues to get some work she is staying with her mother at Kanpur. She is living at Kanpur since October 2008 and normally gets work in the neighborhood, but sometimes needs to go to faraway places also. This way she earns about INR 1,000 to 1,500 per month. Her children and her husband continue to live at the village. She comes to the village for about two-three days in each month to meet her immediate family.

Food security and vulnerability

She has a below poverty line (BPL) ration card entitling her the public distribution system (PDS) food grains (wheat and rice) to meet the requirement of her household for about fifteen days through a payment of INR 205. For the remaining days, they buy it from the market whenever they have money. However, it is never bought at one go due to other necessary expenses on bathing and washing soaps, oil, spices etc. staking their claims on the household income. Food normally consists of potato curry with either rice or chapattis. They sometimes cook green vegetables, when Meena comes back from Kanpur with some money. Lentils, they feel, have become costly and are cooked very rarely, while it invariably used to be part of traditional Indian diet of the poor not very long ago. She had last cooked lentils about one and a half months preceding her first interview and had not cooked non-vegetarian food for more than a year.  There are at least seven to ten days in a month for six to seven months in a year when they do not have anything to eat with chapattis and eat chapattis with salt. Before she shifted to Kanpur, there were times when she did not have any food at home at all and had to sleep hungry for three to four days at a stretch. There has been no episode of hunger for last one year. The diet is however chronically protein deficient and must be very detrimental to the health of growing children. They never had milk to drink; only milk they have is with tea. They purchase 250 ml milk for INR 5 every day to make tea for entire household. Ghee (purified butter) or butter is out of question.

Other consumptions

Clothes for the children are made once in two years in such a way that half of them get it in one year during Diwali and the other half during next Diwali (October/November). Her husband also gets his clothes once in two-three years. She has never purchased a saree after marriage and manages with the sarees she gets[1] during social functions at her household or her parental household. She had got six sarees during her daughter’s marriage.

They have to buy food grains, vegetables, salt, spices, sugar, tea leaves, cooking oil, soaps on a regular basis. The quantity of purchase depends on the availability of money. She and her husband chew tobacco and that also entails expenditure.

Financial transactions: Significant events and income shocks

One of her younger daughters fell sick about ten years back and they had to spend about INR 3,000 on her treatment. They borrowed money from her uncle without interest. That amount has since been repaid. They had to incur major expenditure three years later for the marriage of her eldest daughter that cost them about INR 25,000. As they were unable to give dowry and gave only five utensils as symbolic dowry, they could not search for an employed boy. They still needed to spend towards various customs and the feast for the villagers. She borrowed INR 20,000, out of which INR 5,000 were borrowed at the rate of 120% interest per annum, INR 7,000 at 60% per annum, and remaining 5,000 were borrowed from her SHG at 24% per annum. She could manage to borrow INR 3,000 without interest. She is repaying the interest bearing loans first but has not been able to repay it totally. An amount of INR 10,000 of the marriage loan is still outstanding.

Her daughter is however not treated well at her in-laws’ place. According to her, whenever she goes there, she comes back ill and Meena’s family has to spend money on her treatment. She has got a five year-old son. When she was pregnant, she became very sick and was sent to Meena’s house. Meena had to spend INR 2,000 in her treatment, out of which INR 500 were provided by Meena’s brother.  Now she is pregnant again and has again been sent to Meena’s place. She has now developed asthma and a valve of her heart has got shrunk. She is admitted in a private hospital at Kanpur and an amount of INR 7,000 is already spent on her, including an amount of INR 2,500 that Meena had saved for the marriage of her second daughter. Remaining amount she borrowed at Kanpur on the goodwill of her mother as she has already exhausted her channels of informal credit.

She does not know how she will manage the money to marry off her other children, some of whom are of marriageable age and others are fast approaching that age.

Financial needs

Meena’s household requires money to meet their regular consumption needs, provide for the contingencies- particularly those related to health, build some productive assets as the household currently does not own any productive asset other than the small patch of land that it shares with other four households, and for the marriage of their six children. Moreover, they live in a house that barely provides them with shelter and is dangerous as it may collapse during monsoons. They therefore further require funds to reconstruct their house. Some of the required funds they can generate by saving regularly over a period of time as the household has at least three sources of cash inflow in addition to casual agricultural work by children. They thus require a savings mechanism that is not only reliable but also has provisions for smaller but frequent transactions. Moreover, it should not impinge on their working hours as that would amount to reduction of their incomes. Some needs, especially those related to the life-cycle events however cannot be met by savings alone. They therefore need reasonably priced credit to avoid chronic indebtedness. In addition, they require frequent access to smaller credit for their agricultural investments, to meet their emergency medical expenses, and smoothen their consumption during the periods of lean incomes.

Expenses on health related issues are major constraints on their finances. A part of it, especially that related to major expenses requiring hospitalization may be better managed with provision of reliable and broad-spectrum health insurance. Meena’s husband could very well get his testicles operated without spending much from the household kitty, if the household was covered under health insurance. It would have also ensured that he is operated at a competent hospital rather than at any hospital in order to save some money. Moreover, the household could have avoided much of her daughter’s hospital expenses if she was covered under health insurance.

It is also essential for them to be covered under insurance provisions for whatever productive assets they happen to own. Their cow would have fetched INR 10,000-12,000 before it died. Its death reduced the value of household assets by such a big amount at one stroke. Moreover, the household lost a productive asset as sale of its milk was contributing to the household income. Similarly death of goats further impoverished the household.

As the earning members travel far for their work and are also engaged in employments not providing them with any security they need to be insured against accidents and death.

Access to financial services and microfinance

An NGO, Shramik Bharti, organized a self help group (SHG) in the neighboring village, Dhool, and Meena along with two other women of Barakheda joined it. The SHG required her to deposit INR 20 per month. The SHG allowed to her to borrow on two occasions; INR 1,000 to provide treatment to the youngest son and the goats, and INR 5,000 for her daughter’s wedding. Both loans carried a rate of interest of 24% per annum. She continued with the SHG for about two years. After her daughter’s wedding, she was in a bad financial shape and hence could not repay her loan timely[2] or make monthly deposits to the SHG and had to leave the group. She has however totally repaid her SHG loan. Leaders of the SHG were two Brahmin women from Dhool. She was not aware of the details of her SHG or the NGO. She was also ignorant of what was happening to her SHG savings. She however feels that SHGs are beneficial for the people as they provide an access to cheaper credit to people like her. On deeper probe, she stated that she would have been happier with better savings products and more incidents of loans with flexible repayment schedules. She also felt insulted within the SHG when she failed timely repay her loan installments. Currently she does not have any bank account or any mechanism to save her money.

Another SHG was initiated under the village self employment scheme (SGSY) at Barakheda by one Deepu Dwivedi (again a Brahmin from a neighbouring village) in 2005, consisting of one woman each from twenty households in the village, including Meena. They deposited INR 20 per month with Deepu for eleven months but started distrusting Deepu when they did not get their bank passbook. They all decided to stop their savings and asked Deepu to refund their money. Some women were able to extract a part of their money from him but seven women including Meena could not get back any amount as her husband is considered to be very docile. This incident has made the villagers skeptical and may not trust any such initiative easily in future. In addition, they were deprived of subsidized credit available under SGSY.

Agents of Life Insurance Corporation (LIC) are very active in the area, and being local they are able to convince the people to purchase life insurance policies of LIC. Moolchand, Meena’s husband, had purchased an LIC policy about ten years back when he was working at another plant. He continued to pay the insurance premia for two years, but then his contractor started troubling him and his payment became irregular. As a result, he could not deposit the subsequent premia and lost his premium amount as such policies have a lock-in period of three years. Any discontinuance of a policy before three years does not entitle the policyholder to any refund. Moreover, he was also deprived of his insurance cover.

For cattle insurance the villagers thought that the provision of such insurance is only for the cattle, which are bought on government loan or under some subsidy scheme of the government.

Social protection measures available to the household

Meena’s household has BPL ration card entitling her 20 kg of wheat, 15 kg of rice and two kg of sugar on payment of INR 205 per month, which is sufficient for about 15 days consumption of the household. However she says that in spite of the provision of monthly distribution of the food grains and sugar, the PDS shopkeeper does not distribute it every month and in collusion with Gram Pradhan (elected head of the village) sells it in black market. They get their quota of food once in two months. Her ration card though bears the entries of distribution of food grains every month. She alleges that at the time of next distribution he makes entries of the previous month and as they desperately need whatever amount of subsidized food they can get. This was independently corroborated in almost all the interviews in the village, but there was no consensus for how many months in a year the shopkeeper black markets the subsidized provisions. The shopkeeper however denied these allegations

Her household is also supported to construct a latrine under total sanitation campaign and they were given construction material worth INR 1,500. It was however not enough to construct a roof and provide doors to the structure and hence is not usable. Needless to say, they were all falling apart because of disuse. As material was not enough, the structure also has only one brick deep foundation. The soak pit is also very small with a depth of one foot. With such small soak pits, the latrines may not be of much use even after their full construction. According to her, she would have preferred completing the construction and using it if the amount of shortfall was available to her as cheap credit.

During my visit an inner street was being laid in the village under national rural employment guarantee program (MGNREGA) and her son was engaged to work as a laborer. She was happy that he was getting work in the village itself and did not have to go out of the village. No woman was however employed for the work.

Additional financial needs generated by social protection programmes

In spite of the PDS shopkeeper’s allegedly dishonest ways, she acknowledges the role subsidized food towards food security of her household. This however creates a demand of INR 205 on the day of distribution. Sometimes when they do not have that amount and cannot arrange for it, they have to forego their entitlement of the subsidized food. This used to happen very often when she was not working at Kanpur. She feels that she would be much better off if she has an access to smaller loans for shorter durations. . This way she would also be in a position to complete the construction of latrine that may reduce her medical bills in addition to huge inconvenience of going out to defecate in the open. Such loans would enable her to utilize the subsidies available to her without burdening her much as the loans would be small and for shorter durations. That is precisely the reason that she cannot access such loans through informal channels as interest income against such loans would be small and unremunerative for the lenders.

Leveraging on their social capital to meet financial needs

Meena strongly feels that the extended family-based social protection systems have considerably weakened over the years. The extended family helps only when a household has capability of earning money. She says if she goes to ask for even one kg of flour, she has to listen to the other person’s taunts.

Their social capital networks however are useful in meeting the expenses especially on marriages. Everybody attending the marriage is required to contribute a small sum, sometimes as little as INR five, while bigger amount is expected from near relatives. Such contribution builds up to be a substantial amount as 200-300 people normally attend a marriage.

[1] As a part of ensuring clothing security to women, there is a custom, called bhaat, according to which their brother would get a saree for them at social functions, especially during marriages either at their in-laws’ place or at their parental household.

[2] As other loans through informal sources carried higher rates of interest, she chose to repay them first.

India Post: A story of missed opportunities [Part I: Microfinance]

India Post is a unique institution in many ways. The most important aspect of it is however its extensive network that has capability to deliver tangible as well as intangible goods to almost anybody residing anywhere in the country. Various social groups, particularly those difficult to be reached, can be included in the process of development while leveraging this infrastructure. Few low-income countries can boast of possessing such rich physical network capital.

An organization as old and as deeply entrenched in traditions as India Post needs to keep reinventing itself if it aspires to remain relevant in a rapidly changing political-social-economic landscape. India Post has however been exhibiting massive inertia to change at fundamental levels even in the face of some very potent opportunities during the recent years. India Post story may be one of the most remarkable post-Independence stories of missing almost all possible opportunities to become a far more effective partner in the growth and development process of India than it currently is.

First of such opportunities may be traced to the decade of seventies and afterwards, when the world was slowly waking up to the potential of financial services to reduce poverty. This gave rise to the microfinance movement but India Post steadfastly remained oblivious to it. In India Post, India had an institution that was tailor-made for designing and delivering financial services to the excluded section of Indian society. They were already offering all the financial services relevant to low-income households excepting the credit products. Permitted transactions within their small savings services are in fact smaller than those normally associated with micro-savings. In addition, they offer remittance and life insurance products. They also have had collaborations with the general insurance companies to deliver non-life insurance. They have been delivering various social security pensions on behalf central as well as several state governments. Despite this, India Post network has been consistently failing to meet the needs for financial services for a large population of financially excluded who are otherwise well within its reach.

Post offices were and are still waiting for customers to walk in, and those, who need its financial services the most, never walked in, could not have walked in. India post management tends to believe that the entire population of India has an access to its services. In reality the bottom half of Indian population does not go to post office. They are intimidated by any formal institutions and avoid them unless they are themselves reached out to.

There is another important reason for the economically and socially disadvantaged people to avoid going to post offices particularly in rural areas even when the post office is located in their own village. I discovered this while doing my research in the rural areas of Uttar Pradesh, Gujarat and Andhra Pradesh states. In impoverished localities while discussing their needs for financial services I often encountered people’s need for saving a portion of whatever they earned on the days when they got gainfully employed. They could not do it as bank branches were located far away from their villages. Moreover, banks would in any case discourage them from saving such small amounts and would not allow them to withdraw even smaller amounts required by them frequently. Their almost desperate need to access suitable micro-savings services encourages unscrupulous elements to devise ways to cheat and defraud them of their savings, a phenomenon, which I have described elsewhere. Whenever I asked the people why they were not using small savings services offered by the post office located in their own village they invariably admitted to being totally unaware of such services. Very few of them, if any, had ever visited the post office even when it was very conveniently located in the same village.

When post office network was being expanded in the rural areas the colonial rulers devised an ingenious method to reduce establishment costs of rural post offices to create an extra-departmental cadre of employees to be paid according to the number of hours they were required to work. More importantly, the postmasters were required to provide a suitable office space on nominal rentals, and were required to own immovable properties in their own names in addition to possessing minimum educational qualifications. This resulted in the rural elite monopolizing the postmasters’ institution as they only fulfilled such recruitment criteria. Moreover, all of them located the post offices in a portion of their residences. This effectively ended any possibility of the deprived sections of village population ever entering the post office as they could not dare enter the houses of the elite on their own. The situation has improved slightly over the past few years after the courts intervened to strike down the requirements of owning immovable properties in the village for the postmasters deeming it to be discriminatory. However, a vast majority of postmasters appointed in the old system continue to work as they are not retired. Even in the case of postmasters appointed in the new system the people belonging to the deprived sections keep avoiding post offices as they are traditionally unaware of availability of financial services relevant for meeting their needs in post offices.

In such a situation, India Post could have made any significant contribution to promotion of microfinance only if it had made deliberate efforts to reach out to the potential microfinance clients. This would have required structural changes, and most importantly, shedding out the government-bureaucratic culture where customers are still considered to be beneficiaries who have to approach and request for services, and need to feel obliged and indebted after receiving services, however deficient they may be.

When I was working with International Fund for Agricultural Development (IFAD- a UN agency) I prepared a paper advocating for India Post to enter the microfinance by actively engaging with the people excluded from the ambit of financial services. Such an engagement would not only meet financial needs of the deprived people and thus would go a long way in reducing their poverty in its various dimensions but would also generate additional revenues for India Post. On the basis of the arguments contained in the paper the then head of Tamilnadu postal department (Chief Post Master General- CPMG) requested the then Communications Minister of Government of India to allow Tamilnadu postal department to collaborate with the National Bank for Agriculture and Rural Development (NABARD) to work with the self help groups and provide them with the credit through NABARD funds. The pilot for the collaboration was launched in two districts of Tamilnadu. On request of the CPMG I traveled to both the districts to impart training on microfinance to all the participating postmasters. The program was successful and NABARD wanted to expand it, but true to traditions and character of India Post as an organization, they did not go ahead with the program.

India Post could still have engaged with microfinance even without any collaboration with NABARD. Such engagements could be in the form of supporting self help groups/joint liability groups. If nationalized banks could do this, India Post could have done it much better due to their being located in close proximity with the local communities particularly in rural areas. They could have collected their savings and facilitated their internal lendings. They could have customized their remittance product to meet the needs of huge migratory communities. They could have participated in delivery of various micro-insurance schemes launched by other government agencies, such as Rashtriya Swasthya Bima Yojana and Aam Aadami Bima Yojana.

They could have also tied up with other entities for external lendings and other financial services. Microfinance organizations, non-bank finance companies and banks would be very happy to collaborate with India Post to reach financially excluded through microfinancial products. Brazil and Netherlands Post have already developed such a template. Answers to why this did not happen or is not happening lie within the larger structural issues facing India Post as an organization as discussed in Part IV of this blog story.