Livelihoods promotion of the poor

In summary the products which we have developed or are in process of developing are:

1. A new approach to facilitate formation of SHGs, using a network of volunteers, trained and supported by CPSL intervening for pro-poor development by facilitating formation of SHGs and subsequently access to institutional microfinance and other rural services & markets, the process reduces expenditure of increasing the number of clients and even clients remains the target group which is the poor.
2. A database on which individual SHG records are entered, to enable monitoring progress of SHG formation, development and numbers. The database is a powerful tool for analyzing and providing statistics of lending and borrowing patterns (see charts A and B in section 8 below which are derived from the database). It has also been used to demonstrate (from records of lending and borrowing) SHGs’ and SHG members’ creditworthiness to MF institutions.
3. ‘Purpose-free’ loans, i.e. borrowers given freedom over the purposes of the loan, which may include ‘consumption’ as well as includes emergency loans called General Purpose loan. The loan is repayable in installments and interest is charged on reducing balance and repayment period is one months to two years depending upon the purpose of use. In case of social purpose customers are asked what they could have done if this loan is not available answers gives the clue of repayment schedule and it satisfies the coustomers. Interest is charged @18 percent per annum from the Self Help Groups but Self Help Group members provides to the individual members @24 percent per annum on reducing balance. Maximum limit is Rs 50000 for a group having more than ten members.
4. Emergency loans (for a range of purposes including medical treatment and food), which experience indicates is often extremely important to the poorest borrowers. This loan remains available on a 24-hour basis at the villages and more than hundred customers availed this in last six months. The product has been launched in last August 06 based on our experience, and initially we saw that happening from the internal fund and internal fund was limited and group members had to go for informal sources in spite of our MF. The loan is repayable in installments and interest is charged on reducing balance and repayment period is one months to two years depending upon the purpose of use. In case of social purpose customers are asked what they could have done if this loan is not available answers gives the clue of repayment schedule and it satisfies the coustomers. Interest is charged @18 percent per annum from the Self Help Groups but Self Help Group members provides to the individual members @24 percent per annum on reducing balance. Maximum limit is Rs 5000.

5. Risk management to safeguard credit loans (potentially - CPSL has signed an agreement with its partner, ICICI bank in relation to this to insure all its borrower not only for recovery of credit but also some benifit in case of risk)

Government is trying hard for providing financial services to the poor and efforts of nationalising the bank and changing gear to globlisation is very much visible before us. In spite of all these efforts our Prime Ministers recognises that benifint is not reaching to the poor. why is so?
the product of formal fiancial instiution is not as per the demand of the poor. Beacuse of this difference informal sector of credit is floursihing and product of fromal sector is so flexible that it may not be reloaced by any formal financial services.
we are trying to supply product which is very much near to the informal sector. There is huge market of informal sector and there is no question of competion. if 75 percent of our population is requiring this product it si very hard to supply all of them by one organisation. Any agencies entering in competion will be seen as complementing as against competing.

Product reaches to the poorest ( 70 percent of our clients are Schedule cast or schedule Tribe, 80 % of total clinets are landles)
Products remain available at 24 hours at the doorstep of the clinets
most of the earnings of poor are used for paying interest to the informal sector of credit and poor becomes poorest- we are supporting them to come out of poverty.

Our skills
-Mobilising the poor to become a good customers for getting support through formation of Self Help Groups-
-Handling a credit of less than one US dollars per individual
-Not only Including the poor but also providing benifit to them - the impact of four years of work indicate that with a credit of 50000 US dollars nearly 5000 families created an assets of 350000 USdollars which has visibly created impact on their livelihoods
-expanding the business in large areas- in last two years we reached in more than 1000 villages from the seventy one villages we started with - even in the condition where resource is very scarce to get
- trained persons at place- our system of promtion of work is so designed that it build skills to a common person living in villages of India and they become a resource person in less than an year.
-create emplyment of unemployed youth in the rural areas- we started with 20 volunteers and now more than 150 are working with us- some of them are working as resource persons.
-earn profit from all these exercise
fFve among a team of 160 are professional from one of the reputed instituion of indian _XISS and having more than five years of experince in working in the field of rural development and myself has been working for last twenty years in the filed and learnt a lot .

This is report of impact Assessment done by international consultant of DFID

Working with CPSL staff in Bihar we have identified poverty impacts using three methods:
1. An analysis of the changes in livelihoods of the individual members of two broadly representative self-help groups (SHG) formed by the project based on detailed cost and benefit data
2. Case study descriptions from local project staff of the changes brought for members and households of the two representative SHG
3. Database records on the use of funds across all 167 SHG in 20 villages

SHG members are typically extreme vulnerable poor when they join (around 70% of all SHG members). Membership of a SHG significantly reduces vulnerability, reduces income poverty and is often empowering (particularly for women).

Vulnerability is reduced by enhancing financial and social capital in the following ways:
· Creating loans for medical needs such as emergency caesareans, treating broken limbs and other medical needs (the most common use of funds across 167 SHG)
· Providing short-term loans for food or to prevent distress sales of assets
· Providing an alternative to accepting a form of obliged labour in exchange for a loan – which is often difficult to leave given the low wage offered

In the two groups analysed in detail, 10 members achieved a significant reduction in vulnerability (e.g. eliminating going hungry or having to accept a form of obliged labour when local seasonal work was not available), six achieved a modest reduction (e.g. preventing productive assets being sold to pay for weddings) and only in three cases (where the members left the group) was there no impact.

Income poverty is reduced for virtually all SHG members and their households – covering some 5000 people. Many have gained productive assets that has started (and sometimes completed) a transition from extreme to moderate poverty. One observable indicator of this trajectory of growth is the increasing construction of “pucca” concrete houses by SHG members. While loans are initially used to reduce vulnerability, analysis of all loans made over five years shows that this is typically followed by investment in income generating opportunities such as:
· Leasing agricultural land instead of share-cropping;
· Building stocks of handicrafts and selling at the best location or time; and
· Enabling family members to take jobs in Delhi. The loan adds financial capital enabling the worker to get to Delhi but, equally important, by allowing borrowing for emergency food and medical needs and hence providing a safety net to the whole family, the SHG enables families to take a higher risk/higher return strategy to generate income.

From our detailed analysis of two SHG, the reduction in income poverty alone between 2001-2005 exceeds Rs100,000 – implying nearly Rs18m or £192,000 across all 167 groups. Cost-benefit analysis for the two SHG shows that benefits are approximately twice costs over a five year period and the project NPV over five or ten years is positive even at discount rates of more than 100%. Using current costs for forming and operating SHG this project is justified on income generation alone (even though this does not capture the value of reducing vulnerability – which is arguably the most important project benefit).

SHG also have an important empowering role – providing women, in particular, with information, an opportunity to identify solutions to problems and increased social status within the extended family. These were specifically mentioned as valued outcomes by nearly a third of members in the two SHG we looked at in detail.

An external assessment by the Indian micro-finance organisation BASIX suggested that there was scope for expansion within villages that already had SHG (currently 30-40% of households had members) but there were particular opportunities elsewhere in rural Bihar. With a rural population of 74million and 42% below the poverty line , the scope for upscaling in Bihar alone is enormous. DFID’s successful experience in introducing the same SHG model in Madhya Pradesh indicates that this model is applicable widely in central and northern India.