TurningColdMoneyHot

WhatTheSHGMovementCanLearnFromAnAlternateApproach
KimWilson,VisitingFellow August2013

Introduction

Indiasfinancialecosystemisevolvingatarapidpace,yetcommercialandevenpublicactorscontinueto bypassruralhouseholdsinsearchofmoreprofitableandmoreeasilyreachedmarkets.Pickingupthe slackareNGOs,underevertighteninglegalconstraints,andmassivegovernmentledprograms.The schemesoftheNationalBankofAgricultureandRuralDevelopment(NABARD)andNationalRural LivelihoodsMission(NRLM)arefarreachingandcarrywiththemamandatetodevelopruralfinancial marketsaswellastosupportpeoplelivingandworkinginthesemarkets.Withinthesebroaderforces, i theAgaKhanFoundationanditspartners inIndiahaveenjoyedsuccesswithamethodcalled CommunityBasedSavingsGroups(CBSGs),whichassistsruralandperiurbanwomenandmenin puttingtheirfinancialresourcestowork. TheaimofthispaperistopersuadepractitionersfamiliarwiththeSHGmodeltoassesstheadvantages oftheCBSGapproachandtoadoptfeaturesrelevanttotheircontexts. 1. WhatisanSHG? Initiatedinthe1980sbyseveralNGOs,theSHGmovementevolvedtoincludebanksandgovernment stakeholders.ManystatesinIndiapromotetheformationofSHGsforavarietyoffinancialandsocial purposes.SHGsareoftenencouragedtolinktoabankforcreditthatsupplementsthegroupcorpus. WhilethereisnosingleSHGmodel,thereisasetofcommonlyusedpracticesthatareunderstoodto expresscoreSHGprinciples.AnSHGconsistsof1020womenwhoselfselectintoafinancialgroup.The groupsetstheamountandfrequencyofsavings.Italsodecideswhointhegroupmightreceivealoan, forwhichpurposestheloansaretobeusedandtherateofinterestborrowersmuchpay. Technically,mostSHGsareaformofASCAaccumulatingcreditandsavingsassociationwithnoset dateonwhichthegroupcorpus(savings,interestincomeandfees)isreturnedtoitsmembers. 2. WhatisaCBSG? ACommunitybasedSavingsGroup(CBSG)isanapproachpromotedbytheAgaKhanFoundationandits partners.InspiredbytheVSLAmodelrefinedbyCAREinAfrica,byindigenousASCAsoperating throughoutIndia,andbyPradansearlyeffortsineasternIndia,theCBSGmodelfollowsaspecific


systemoffinancialintermediation .Duringanintensive5daytraining,facilitatorsmasterasetof principlesandproceduresinsavingsgroupformationandstrengthening.Withinlessthanayearoftheir firstmeeting,CBSGswillhavegraduated,meaningtheycanmanagetheirfinancialactivities independentofafacilitator.ThefacilitatorispaidbytheCBSG. UndertheCBSGmodel,thefacilitatorbringstogether1520women,withgroupsizevaryingbylocale. Membersmeetregularly,usuallytwicepermonth,topurchasesharesinagroupfund.Afterjustafew weeksofmeeting,membersmayrequesttoborrowmoneyfromthefundforanypurposetheychoose. iii Attheendoftheyearwhenallloanshavebeenrepaidwithinterest,thegroupsharesoutitscorpus , distributingsharecapitalandproportionateincomebacktomembers. Technically,CBSGsaretimeboundASCAsaccumulatingcreditandsavingsassociationsthathaveset dateinwhichthegroupcorpus(sharescapitalplusincome)isreturnedtoitsmembership. 3. Whatarekeysimilaritiesanddifferences? TheCommunityBasedSavingsGroupapproachsharessomefeatureswiththeSHGapproach.Groupsof 1020orevenmorewomengatherforthepurposesofpoolingandmanagingtheirfinancialresources. Membersmeetregularlyandareabletorequestloansfromthegroupcorpus. But,thesimilaritiesendthere(seeBox1:FeaturesofSHGsandCBSGs).Laterinthispaperweexplore crucialdifferencesandtheirimplicationsforfinancialinclusion. Box1:FeaturesofSHGsandCBSGs Feature SHG CBSG Lengthoftimefromearlygroup Threeormoreyears. Lessthanoneyear. formationuntilcompleteautonomy. Thewayinwhichthegrouptakes Asregularsavingsdeposits, Asregularsharepurchases custodyofmembercontributions usuallythesameamountper andcanvarybymemberand personpermeeting. bymeeting. Socialfund Distributionofcorpusbackto Raredistributions;corpuscan Periodic(usuallyannual), members stayintactfordecades planneddistributionofcorpus tomembersinproportionto shares. Recordkeeping Severalsetsofsavings,loan, Passbooks.Groupshave andledgersandpassbooks optiontokeepasimple ledger. Creditfrombanksandoutside Highlypromoted Notpromoted,savingsare sources promotedandoftenCBSGs haveexcessliquiditytolendto members.
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Metastructures(federations, clusters,etc.) Extant,oftenpartof governmentSHGpromoted programs ManySHGsformedforthe purposeofchanneling governmentbenefitsto members. None

Governmentbenefitsthrough groups

CBSGmembersmaychooseto joinotherSHGgroups,but CBSGsdonotchannel governmentbenefitsto members.

II

ChallengesoftheSHGModel

ChallengesembeddedintothenormsoftheSHGapproachunintentionallyexcludesomeofthevery peoplethattheSHGmovementhopestoserve.Weexamineafewofthemorecriticalchallengesbelow. 1. ServicesdonotmatchthecashflowofmembersorthecapacityoftheSHG. TheincomeofmanypoorSHGmembersdependsonwagelabororfarmingactivity.FewlivinginIndias hardpressedruralareasenjoysteadyemploymentwithmuchofhouseholdearningsbeingseasonal, basedonfarmingcyclesandwagelaborpatterns.Becauseincomeisplentifulatcertaintimesofthe yearandscarceatothers,thecapacityofmemberstomakeregularsavingsorloanpaymentsislimited. (Sinhaetal2008). Exaggeratingtheimpactofirregularincomeistheoccurrenceofhouseholdemergencies.Aboutof malariaoraflareupofjointpaincanbringonsuddencosts.Irregularincomeanderraticexpenses createcashflowvolatility,reducingamembersabilitytomakesteady,samesizepaymentstoher group.Memberswhoarechronicallyillorwhohavechronicallyilldependentsinparticularunderstand theirtendencytobouncefromsmallemergencytosmallemergency. Theyknowexpenseswill emerge.Theyjustdontknowexactlywhen. Samesizesavingspaymentsdonotworkforthesekindsofmembers.Infact,samesizepayments ensurethatthegroupcorpusshrinkstothepaymentcapacityofitspoorestormostcashvolatile members.Shouldamemberbecertainthatshecouldcommit5rupeespermonththoughinsome monthsshemightdeposit25rupeessheclaim,inanefforttoreducetheriskofovercommitting,that hermaximummonthlysavingscapacityis5rupees. Thesamesizedepositnotonlyrobsmembersofthechancetosetasidemoresavingswhentheyhavea littleextramoneyinthehousehold,itdeprivesanSHGofthechancetoincreaseitscorpusandearn moreinterestincomeforitsmembers.TheSHGhastwooptionswhenfacingthisdilemmaofsamesize payments: excludememberswhoarepoororcashvolatileorincludethemandminimizethebenefits tothegroupatlarge.


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. Whateverthecauseofthisnorm,theconditionthatanewmembermustmusteranentrysum 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. SHGslackimportantrestperiodsanddefinedshareoutdates.

TypicallySHGsaccumulatesavingsovermanyyearswithnobreaksinbetween. Itisnotdifficultto imaginewhyfacilitatorsofSHGwouldpreferlonglifespansoftheirgroups.(Rutherford2009)They spendagreatdealoftimesettingSHGsupandwouldprefernottodismantlethem.Permanentgroups offerapermanentplatformsontowhichfacilitatorscanfixavarietyofotherservices. Yetsuchaformulaofborrowingyearinandyearoutwithnodividendsdistributedtomembers,no cleancompletionofafinancialcycle,noannualrestperiodsforfestivals,harvests,orpreparingfamilies fortheinevitablerainsandfloodsignoresseasonalrhythmsandpreventsthechanceforgroupsto periodicallyreconstitutetheirmembershipandcontinuesaving. Theresultisthatprospective membersmaybeexcludedfromparticipatinginanySHGatall.Thereisnologicalmomentofentryfor themiftheychoosetocomemidstream. WithoutautomaticrestperiodsSHGsmayunintentionally excludesocialgroupsthatwouldenjoythebenefitoffinancialservices. Followingareafewexamples.

ExclusionofMigrants.InIndia,aprincipalincomecopingstrategyofruralhouseholdsisshorttermor circularmigration.Itislargelyaninvisiblephenomenon,withlimiteddata.ArecentreportbyUNICEF indicatesthatstudiesstruggletopinpointthenumberofadultsandyouthmigrating.Estimatesvary,


suggestingthatanywherebetween15millionand100millionpeoplemigrateeachyear,mainlyin searchofwork.Whatevertheexactnumbermaybe,UNICEFclaimsthatmostseasonalmigrantsbelong toeconomicallydeprivedgroups(UNICEF2012).

MigrationmakesanSHGmemberspresenceatyearroundmeetingsimpossible.Withoutanannual breakinmeetingsorareturnofsharecapital,SHGsdonottakeintoaccounttherealityofpeopleonthe move.Migrantswithseasonalworkpatternswouldneedtostopattendingmeetingsandmightliketo uselumpsumsfromashareouttohelpsupporttheirtravel.Akeyreasonsmembersdroppedoutof SHGsaccordingtoa2005studywasmigration.(Sinhaatal2008)

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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 newmembersarelockedoutofexistingSHGs.Thereisalsoalockinfactoratwork.Membersof groupsfinditdifficulttoleavepermanentgroups.Groupshavedifficultycalculatingsavingsorensuring thereisenoughliquidityintheircorpustofundafullwithdrawal. Ifelitemembers(Tankha2012)have takenoverkeyfunctionsofanSHG,thenthelesselitemayfindthemselvesinastateofpermanent capture,meetingendlessexpectationstoproduceregularsavingswithouttheclearbenefitofbeingable toaccessthosesavings.

4. Complicatedrecordslimitsavingsaccessandcreatedependency. Aswehaveseen,contributingtobothlockoutandlockinisthetimeunboundednatureofSHGs. Alsocontributingarecomplicatedbookkeepingsystems,whichthoughnotrequiredofSHGs,seemtobe thenormofSHGoperations.Regulardepositsarenotedinledgersandpassbooks.Loanstakenand paymentsmadeareregisteredinasimilarmanner.Thesesystemsmaketheprospectofreturning savingstoamembercomplicated.

Aoneroussystemofpassbooksandledgersguaranteesthatgroupswithlargelyilliteratememberswill notbeabletoselfmanagetheirfinancialactivities.Instead,theymustrelyontheassistanceofexternal recordkeeperstoperformtheevenmostbasicfunctions.


SHGsacrosstheboardsufferfromincomprehensibleandinaccuratebookkeeping.Besidesthewasteof timeofkeepingmultiplebooks,therecordsareofteninaccurate,subjecttooverwritinganddouble entry,additionandsubtractionmistakesaswellasomissionofimportantinformationlikeloan repayments. Inasimpleaudit,onestudyfoundthat40%ofgroupshadweakrecords.Manyhadnot beenupdatedforayearormore(Sinhaetal2008)

5. Externalcreditcanbeconfusinganddamaging.

NationalandgovernmentschemesinIndiaofferSHGscredittosupplementtheloansfromthegroup corpus.Intendedtohelpentrepreneursprocurefixedassetsorfundworkingcapital,evidencedoesnot bearouttheseusesofcredit. InMicrofinanceSelfHelpGroupsinIndia,AjayTankhawritesthatSHGs,dependentoncredit,suffer fromalimitedcapacitytoabsorbnewroundsofcredit,particularlyafterthethirdorforthround,yet theystillseekmorecredit.Withtheircapacitytohandlelargerloans,SHGsmayexperiencea phenomenonsimilartothatofthePeterPrinciplewhereinSHGsrisetotheleveloftheirown 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(Srinivasan 2010).Loansizesarelikelytostaysmallifsaverscannotgarnergoodreturns.BecauseSHGfacilitators discouragereturnsinfavorofaccessingbankcredit,thereislittleincentiveforsaverstosavemorethan theminimum.

Whilelinkstosourcesofcreditcanbeusefultomaturegroups,itcanbedamagingtonewgroups.SHG facilitatorsareoftentaskedwithhelpingbankstocollectloans,anactivitythatblurstheirroleasan enablerofselfhelp.Worse,membersshakedownfellowmemberstocollectloansinorderthatthe groupmightqualifyforafreshroundofexternalcredit(Sinhaetal2008).Andfinallylargerloansare oftenreservedformoreelitemembers.

6. Complicatedservicestructurescreatenewburdens.

Stategovernmentspromotemorethan75%ofSHGsinIndia(Tankha2012).Wheregovernmentstaff wasonceresponsibleforbuildingbasicinfrastructureordeliveringbasicservices,SHGshavebecome responsiblefortheseactivities.Livelihoodsimprovement,forestrymanagement,watermonitoringnow fallintheprovinceofSHGs.ManyschemeslayerontoSHGscomplicatedsuperstructuresthatrequire groupstofederateandclusteratdifferentlevels(seeBox2).Variousfinancialandmanagement


mechanismsdeployedbytheprogrammeensurethatSHGsremainlargelycreditdrivenanddependent onoutsidesupport(Ledgerwood2013). Ambitiouscoverageandsaturationgoalsoftheschemecause onetowonderhowavillagermightoptoutwithoutlossofdignityormarginalization. Box2:JeevikaNationalRuralLivelihoodsMissioninBihar:AnExampleofNewSHGBurdens WithsupportfromtheWorldBank,Jeevikaseekseconomicandsocialempowermentoftheruralpoor inoneofIndiaspooreststates,interveningwithcommunitiesthroughfourcomponents:institutional capacitybuilding;socialdevelopment;microfinance;andlivelihoodspromotionandstrengthening. (Tankha2012) Jeevikaisambitious.Atitsendin2022,theprojectaimstoreach100%ofpeoplewhoarepoortothe iv nakedeye .Theprojectplanstoreachfivemillionfamiliesin44blocksofBihar,roughly4,000villages. AccordingtoJeevikawebsite,Thecorestrategyoftheprogrammeistobuildvibrantcommunity institutionsofwomen,whichthroughmembersaving,internallending,regularrepaymentand economicactivitiesbecomeselfmanagedinstitutions.Selfhelpgroupsaretheprimarylevelcommunity organization.Fromthisbasestructure,Jeevikahaselaboratedacomplexmanagementandcredit structurethatinvolvesVillageOrganizations,BlockLevelFederations,CommunityInvestmentFundsas wellasbanklinkages.Eachrequiresdifferentrecordkeepingandadministration,withsomeoverseenby staffandothersdevolvedtothevillagelevel.

III

TheCBSGModelandChallengesAddressed

TheCBSGmodeladdressesmanykeychallengesofSHGs.Withoutastudytodeterminethedifferencein householdimpactsbetweenCBSGsandSHGs,oracompleteunderstandingofcostsstructures,itis difficulttoquantifybangforthebuck(unitofimpactperunitofcost)andcompare. But,atthisearly stageitappearsthatCBSGshavethecapacitytofosterfinancialflexibilityandsocialinclusiontoa 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.


2. Theflexibilityofthesharesystemmatchescashflowofmembers. Membersmaypurchaseasfewasoneshareandasmanyasfive(somegroupssetthesharemaximum ratehigher)andmayvarytheirpurchasefrommeetingtomeeting.Ifmemberincomeistypicallylowin theseasonbeforetheharvest,memberspurchasefewershares.Aftertheharvest,memberspurchase more.Eachmembercandecideateachmeetingwhathercapacityisandmakesharepurchases accordingly. Suchflexibilitytakesintoaccounttherealitiesofcashvolatilememberswhomaynotbeabletocommit tosamesizesavingsthroughouttheyear,ortosavingsthatequalsthatofothermembers. It addressesthechallengeofSHGsmentionedearlier:inanSHG,membersmisstheopportunitytoset asidemoresavingsthanthedefinedsavingsrate.InaCBSGmemberscaneasilyconvertoccasional householdsurplusesintoprofitableinvestments. 3. Theperiodicshareouteasesimportantshufflingandreshufflingofmembership. Eachyear,theCBSGcallsinitloansfrommembers,makessureallinterest,feesandfinesarebrought current.Itdistributescapitalincludingearningsbacktomembersaccordingtotheshareseachhas purchasedduringtheyear.Membersmayimmediatelyinvesttheirshareoutsinanewcycleof investmentandborrowing.However,manyclaimtheylikethelumpsumanduseittomakehome improvements,topurchaseclothing,ortopayforanimportantmedicalprocedure,hirelabourtohelp duringtheplantingseasonorpayschoolfees. Besidesofferinganattractivelumpsumtoeachmember,thisregularclearingoftheCBSGfundallows otherbenefitstooccur.First,unmarriedwomenmightjoinagroupforayearortwo.WhileanSHG mightresistadmittinganunmarriedwomanduetothetroubleofcalculatingherdepositvalue,aCBSG hasendofyearandevenduringtheyearsystemsinplacetoallowanunmarriedwomantoleavethe group.WesawevidenceofthisnearPatna. Second,aregularclearingofaccountsallowsnewmemberseasyentryintoanexistingCBSG.Theydo notneedtomusteralargeentrysumtogainaccess.Theysimplyjointhegroupatthebeginningofa freshcycle.Sucheaseofentryallowsmarriedwomennewtothevillagetojoinandmakesroomforlate adopters.Italsomakesroomfordisgruntledorevenmarginalizedmemberstograciouslyexitthegroup withtheirdignityandlocalrelationshipsintact. CBSGswoulddowelltopayattentiontovariationsinTanzaniaontheshareoutmodelwheregroups choosetoshareoutafterseveralyears,annuallydistributedividendsbasedonprofits,butallow memberseasywithdrawaloftheirfullsavingsifmembersgiveamonthsnotice. Newmobile technologyinEastAfricahasthepotentialtomakeeasycalculationofindividualmemberinterest amounts 4. Nonautomaticcreditlinkagesallowmemberstomaximizehotmoney. TheCBSGapproachacknowledgesthatnotallmoneyisthesame.Membersdividetheirthinkingabout


whethermoneyishotorhardwonfromthriftorcoldandeasilywonfrominstitutionalsources (Wilsonetall2010).Baksamoney,orboxmoney,isdearertomembersandmorelikelytobe safeguardedthanexternalcredit. Hotmoneyaffordsmemberstwoimportantadvantages:loansfromthecorpusaremoreflexiblethan 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,butarenotrequiredtodoso.Ourresearchshowsthatsomememberschoosetobeinmultiple 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.

IV

PromisingOpportunitiesforTheCBSGApproach

1. NABARDsSHG2PoliciesandProductsareCBSGFriendly IncorporatinglessonsitsfirstphaseofSHGpromotion(herecalledSHG1),NABARDhasreengineeredits approachtoincorporatebothmoreflexiblefinancialoptionsforgroupsandindividualmembers. First,NABARDhasremoveditsrequirementinSHG1whereanSHGhadtoguaranteeallbanklinked loans,evenifjustafewmembersofthegroupborrowed.UnderSHG2,theentiregroupneednot guaranteeabankloan.Smallersubgroups,orJLGs(jointliabilitygroups)mightborrow,withtheir membersguaranteeingloansofJLG.ThoseinthelargerSHGorCBSGneednotbeatriskfortheloansof theJLG. Second,NABARDispioneeringtechnologyrelatedinitiativestoassistSHGswithrecordkeeping.Using mobilehandsets,100SHGsinTamilNaduareabletorecordfinancialtransactionsintheirlocal language.MobilephonescapturefinancialinformationaswellasmeetingattendanceandviaSMS, everymemberreceivesaweeklyreport.Similarly,anotherpilotinWestBengalisusingaPOSdeviceto capturemembersavings,borrowingandbankbalances. Thedeviceisalsoabletoinstantlyprinta physicalrecordandcangeneratememberlevelandgrouplevelreports. (NABARD) Iftechnologyviamobiledevicescouldenabletheprecisetrackingofindividualtransactions,thenaCBSG wouldknowtheworthofitsgroupandeachofitsmembersatanygiventime.MorematureCBSGs couldcashoutaportionoftheircorpuswhilebringingabalanceintothenextcycle.Thiswouldallow thegrouptoprovideendofcycleorlongertermloans,whichmightbeusefulforlivestockfatteningand reclaimingmortgagedland. 2. AadhaarCanOfferIndividualsinCBSGsAdditionalServices AadhaarisaninitiativeoftheGovernmentofIndiatopromotefinancialinclusioninallstates.Issuedby theUniqueIdentificationAuthority,itisa12digitindividualidentificationnumberthatallows individualstoeasilytransactwithbanksandbankingcorrespondents,todeposit,transferorreceive electronicpaymentsincludingcashassociatedwithgovernmentbenefits(UIPAI). Aadhaarmightbeagoodcomplementtomembersingroupswhoenjoythedisciplineandprecisionof theirCBSG,butwhowouldalsoliketobankprivatelyusingtheconvenienceoftheirmobilephoneor welllocatedcorrespondents. Infact,theregulationpermitslocalintermediariessuchaswomens savingsgroupstoprovideservicestotheircommunities.

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Conclusion

TheCBSGapproachbuildsonthephilosophyofearlypioneersintheSHGmovement.Itcanafford stakeholdersintheSHGmovementtodayachancetorealizetheoriginalpromiseofthismovement:full socialandfinancialinclusion. Usedwell,elementsoftheCBSGapproachcanstrengthenSHGpractices. Tooptimizegrouporganizingactivities,thefacilitatorsofSHGscanincorporateintotheirworkthe elementsdescribedinthispaper.Traininggroupstokeepsimplerecords,toreplacesavingswithflexible sharepurchase,toconductannualshareouts,andtoincludeasocialfund,isnotdifficult.Anditcan leadtomoreautonomousgroupsthatofferversatileservicestotheirmemberships.Ininstanceswhere convertingSHGstoCBSGsisdifficultforexampleincontextswhereexternalcreditormanagementhas predeterminedtheoverallapproach SHGfacilitatorscanencourageSHGmemberstoform additionalgroupsthatfollowtheCBSGapproach.Inthisway,memberscanchoosewhichgroupthey belongtoandforwhichpurposes.

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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, anENABLEPublication,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,BankingonSelfHelpGroups,TwentyYearsOn(2012)SAGEPublications,NewDelhi 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;forguidesonsimilarmodelsseewww.savingsrevolution.org iii TheCBSGapproachtypicallydoesnotusethetermcorpustodescribedpooledsharepurchaseand deposits.ItisusedinthepapertodrawsimilaritiesanddifferenceswiththeSHGmodel. iv InterviewwithRavinderNathChoudhary,DistrictProjectManager,December2012.

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