Thrift and credit programme is the first level entry point for Kudumbashree. Poor women are organised into neighbourhood groups and the first activity initiated is the thrift programme. NHGs start lending to members using the group’s savings. Subsequently, each NHG is graded and once it qualifies, they are eligible for bank linkage. For the loans availed through bank linkage for lending within the groups, Kudumbashree Mission provides a token matching grant to the NHGs.
“When we started organising women into groups, thrift and credit was not even there in the agenda. But the groups in Malappuram, with their experience in conducting traditional ‘Kurikkalyanam’, started a weekly thrift in their groups. Of course, there was guidance and advice from NABARD, and also the Alappuzha experience behind this. It was then women who decided on a 2% per month interest rate on loans taken from their savings”.
“When NABARD tried promoting bank linkage, these women refused it; they said they did not want any bank loan and would continue with loans from their own savings. The women had the experiences of borrowing from private money lenders who operated in the area. May be this is what made them suspicious about even bank loans”.
-Rajeev Sadanandan, Joint Secretary, MoRD, Government of India; was district collector, Malappuram during the CBNP project.
Poor families need money on a regular basis for a variety of needs. The typical needs can be classified in the following categories.
- Consumption needs
- Contingency needs
- Festival needs
- Needs for income generation activities
What is meant by thrift and credit is to encourage the poor to save some money from what they use for their regular expenses, and help them to avail small loans from their savings. Every member brings a pre-decided amount (this amount is decided by the group) to the weekly group meetings. The money collected is deposited in a bank in an account jointly operated by the president and secretary of the group. As months pass, these savings progressively increase to relatively large amounts.
Once a neighbourhood group completed six months of operations with regular meetings and thrift, the group can start internal lending. This means lending small amounts as decided in the group meeting to the needy members. The group decided who would get the loan and how much. The advantage here is that everyone knows everyone else in the group. Therefore, the loans are typically decided in reasonably.
NABARD has developed a 15-point grading system for NHGs; it is transparent and therefore NHGs can work towards eligibility for bank linkage.
“Banks were reluctant to associate initially. It was cooperative banks that took the initiative in lending to NHGs; SL Puram Cooperative Bank in Alappuzha was the first bank to lend to Kudumbashree NHGs in a path-breaking step. Earlier, Ulloor Panchayat Cooperative Bank in Thiruvananthapuram had lent to NHGs formed there under the initiative of Kerala Sastra SahityaParishad”.
-Kesavan Nair, former Programme Officer, Kudumbashree Mission
At the NHG, the Volunteer in charge of income generation is responsible for the activities relating to micro-finance including management of thrift and credit and preparations for bank linkage, and subsequently for maintaining the relationship with the bank. ADSs have a volunteer responsible for micro-finance in their Executive Committees. Every CDS has a Sub-Committee on Micro Finance headed by the CDS Vice Chairperson.
The State Mission has a Micro-Finance Team headed by a Team Leader. At the district level, Assistant Mission Coordinators lead the micro-finance team.
Roles in Micro-Finance
- NHG: Management of the thrift and credit programme including internal lending and account keeping, grading, bank linkage
- ADS: Monitoring the thrift and credit programmes of NHGs, facilitation of bank linkage
- CDS: Monitoring of thrift and credit; facilitating bank linkages; payment of matching grant to bank-linked NHGs; updating management information system
The District Mission approves and releases matching grant to CDSs. It is also responsible for liaison with district level review committee of banks. District Missions conduct capacity building programmes too.
Liaison with State Level Bankers Committee (SLBC) is the responsibility of the State Mission. State Mission monitors the micro finance programme at the state level through the management information system. It designs programmes and schemes and does capacity building.
State Mission’s Schemes
- Matching grant: This is an incentive scheme for NHGs that establish bank linkage by qualifying in the grading system. The quantum of grant is linked to the total accumulated savings of the NHGs. The incentive is calculated as Rs 5000 per NHG or 10% of the total savings, whichever is less.
- Interest subsidy: Under this scheme supported by the Government of Kerala, the State Mission provides 5% interest subsidy on bank loans to NHGs; Joint Liability Groups (JLGs) running enterprises are also eligible for interest subsidy.
- Education and Campaigns: Mission conducted an accounting and audit campaign in 2009 for improving systems of micro finance across the state. It also conducts education programmes for financial literacy and for improving the management of NHGs.