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Rural Immersion Report:

Report on Micro financing model in Behragora -
Success story and way forward


By

Manish Vijay (G14086)
Mayank Sood (G14087)
Naveen Kumar Pathak (G14088)
Navneet Kumar (G14089)
Nikhil Ramakrishnan (G14090)
Nithin Thomas Kurian (G14091)





















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Contents


1. Introduction to micro financing and self-help groups-The Indian Context ................................ 3
2. Celebrating success in Behragora ............................................................................................... 4
3. Reasons for success of micro finance model in Behragora ........................................................ 7
4. Role of Banks and NGOs ............................................................................................................. 8
5. Recommendations and Way forward ......................................................................................... 9
6. Our Contributions ..................................................................................................................... 10
7. Closure Comments .................................................................................................................... 11
8. APPENDIX .................................................................................................................................. 12






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1. Introduction to micro financing and self-help groups-The Indian Context

Microfinance
Microfinance is often defined as financial services for poor and low-income clients offered by
different types of service providers. In practice, the term is often used more narrowly to refer to
loans and other services from providers that identify themselves as microfinance institutions
(MFIs). These institutions commonly tend to use new methods developed over the last 30 years to
deliver very small loans to unsalaried borrowers, taking little or no collateral. These methods include
group lending and liability, pre-loan savings requirements, gradually increasing loan sizes, and an
implicit guarantee of ready access to future loans if present loans are repaid fully and promptly.
More broadly, microfinance refers to a movement that envisions a world in which low-income
households have permanent access to a range of high quality and affordable financial services
offered by a range of retail providers to finance income-producing activities, build assets, stabilize
consumption, and protect against risks. These services include savings, credit, insurance,
remittances, and payments, and others.
Microfinance clients are often self-employed, household-based entrepreneurs. In rural areas, micro
entrepreneurs often have small income-generating activities such as food processing and trade.

Self Help Group:
A self-help group (SHG) is a village-based financial intermediary usually composed of 1020 local
women or men. A mixed group is generally not preferred. Most self-help groups are located in India,
though SHGs can also be found in other countries, especially in South Asia and Southeast Asia.
Members make small regular savings contributions over a few months until there is enough capital
in the group to begin lending. Funds may then be lent back to the members or to others in the
village for any purpose. In India, many SHG's are 'linked' to banks for the delivery of micro-credit.
A SHG may be registered or unregistered. It typically comprises a group of micro entrepreneurs
having homogeneous social and economic backgrounds; all voluntarily coming together to save
regular small sums of money, mutually agreeing to contribute to a common fund and to meet their
emergency needs on the basis of mutual help. They pool their resources to become financially
stable, taking loans from the money collected by that group and by making everybody in that group
self-employed. The group members use collective wisdom and peer pressure to ensure proper end-
use of credit and timely repayment. This system eliminates the need for collateral and is closely
related to that of solidarity lending, widely used by micro finance institutions. To make the book-
keeping simple enough to be handled by the members, flat interest rates are used for most loan
calculations.
In some villages, SHG members are involved in various activities instead of one common activity.
They provide each other moral support, share ideas and give occasional financial help. Such kinds of
groups are also making good success in villages
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2. Celebrating success in Behragora

Location
Baharagora is a small town in East Singhbhum district and situated on the south-east corner of
Jharkhand, India. It is 95 km from Jamshedpur & 189 km from Kolkata. KolkataMumbai National
Highway 6 passes through it. National Highway 33 connects NH 6 at Baharagora and NH 2 at Barhi,
Jharkhand.
Nearest Railwaw Station Chakulia 28.6 km, Jhargram 49 km & Kharagpur 66 km &
Kolkata(Howrah)189 km
Baharagora became a block in the year 1956. It is located at the southern end of Jharkhand.

More details on behragora and related pictures can be found here.
Day 1
1. Dada Hotel (Village Kaparia)
A line hotel located on NH 33 besides the guest house of forest department, started in
2010 with a capital of Rs. 3.50 lakhs
Proprietor Din Bandhu Bera (education 8th Standard)
Member of Self Help Group Ms. Nakama Bera
Family Background
Lives in a Kachcha house with wife, two sons and three sisters.
Elder son works with Tata Steel and the younger son has left school to support his
father in hotel. Family engaged in small scale rice farming and goat rearing.
Initial Investment Rs. 3.50 lakhs financed through sale of land to Tata in 2010
Previous Occupation Driver with Utility Transport
Current Operations
Number of staff 8 (1 cook and 7 utility staff)
Wages Cost Rs.150/- per day to cook and Rs. 140/- per day to the rest
Electricity cost Rs. 3000/- per month
Land Lease Rent Rs. 100/ per day (10 year lease)
Sales Rs. 2000/- per day (approx.)
Net revenue Rs. 2000-3000/- per month
Assistance from Self Help Group Rs. 5000/- in 2013
Reason for taking micro finance To cater to operational expenses, build new contacts and
increase know how
Future Plans Looking forward to construction of four lanes on NH 33 as the hotel will be
the one of few remaining untouched from this construction and will lie just beside the
highway.
Investment desired in electricity generator but constrained by lack of resources
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2. Topan Bera Paan shop
A paan shop (gumti) with cigarettes and few eatables and utilities
Started business in 2013 with initial investment of Rs. 50,000/- + Rs. 25,000/-
Previous a driver and still takes odd driving assignments to supplement income
Two sons 22 & 18 years studying
Location advantage proximity to nursing home, girls school, and new ITI college
Owns 4-5 bigha of land
Net income per day Rs. 100/- per day
3. Self Help Group 1
Group of 13 women
Micro-finance beneficiaries have bank accounts
Initially part of block level SHGs before joing hands with Kalamandir
Initially got Rs. 25,000/- per group from block along with Government
subsidy
Government subsidy no longer present
Involved in activities like cooking in government primary schools as part of NREGA
Were given Crusher training in village which was not of much use
Have Insurance Cards but its not much useful as it requires compulsory
hospitalisation for 5 days
No pension
Focus on collective efforts as a group
Activities involved in:-
Agarbatti scenting and packaging (as making is not viable)
Sari selling in open market or by making rounds on foot (pheri)
Paan shop
Gas lighter
Muri bhaji
Poultry
Jharkraft

Future expectations/aspirations:-
Increase business put in more money get more returns
TELCO like self-employment training near village
Training on marketing aspects of business
Some jobs to supplement their income
Extra loan to expand business
Day 2
4. Khan Mobile and Shoe Stores
Arts graduate
Started business in absence of any employment opportunities happy with
decision
4 sons all studying otherwise they will get spoilt and waste time
3 shops in all 2 shoe store and 1 mobile store
Mobile store is young business but gives more revenue
Current stock in excess of Rs. 1 lakh
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Supply from Kolkata
Timings 7am 10 pm
Joined Kalamandir SHG for making new contacts and relations plus knowhow
and training
Relatives in Kolkata
Give importance to education
Use all kinds of fuels coal, wood and gas
No health or insurance card
Future Expectations:-
Business growth
If more investment then more revenue
Extra loan
5. Central Bank of India (Santosh Kumar Bank Manager)
Considers self help groups more loan friendly
Less chances of default
Less NPAs
Previous history has been good
Government subsidy
Have been involved with SHGs through block
More instruments centred towards SHGs engaged in single task
A challenge for SHGs financed by Kalamandir as they are engaged in different
tasks
More instruments focus on agriculture related credit
Existing loans to SHGs
o About 20-25 thousand
o At 7% pa
o Subsidy from government on 25% of loan
Willing to provide finance to Kalamandir SHGs as they seem to have good record
would need to evaluate each groups on its own
6. Bank of India (N K Tiwari Bank Manager)
There is no subsidy from government on SHG
Most of SHG activities are closed
People took loans but did not utilise for purposes mentioned
Some returned the loan, some didnt
But the loans never met the intended purpose of development or making a
difference to individuals life
People misuse subsidy
SHGs should take-up those businesses which can be successful in the region e.g. goat rearing
There is 50% subsidy in dairy industry
Purchase of lactating cow/buffalo
But previous experience of villagers has not been good
Poor quality animals were provided
Another options can be:-
honey bee rearing based on training received
Paper plate making
Another modes of finance like General Credit Card are in operation in villages like Mohanpur
Bank accounts needed for credit history
Wanted help in recovery of bad loans
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GCCs and SHGs formed about 10% NPA
Ready to extend loans to SHGs of Kalamandir on case-by-case basis starting with small
numbers
7. Self Help Group 2
A group of about 15 women
They are happy after taking the loan from Kalamandir
Co-ordinators meet them every month
Engage in farm labour and NREGA to supplement income
Labour rates Rs. 60-100/-
Work from 10 am to 4 pm
Get medicines from Aanganbadi nurses
Have voted in elections politicians come only for vote
Need to save for dowry
Children engaged in studies
The illiterate once keep account on the walls
All have account in the banks
Renewal of health/insurance card every year
Activities involved in:-
Cycle repair shop
Wood
Dairy business
Goat rearing
Poultry
Fruits/Flower business
Silk making
Future plans:- Need more loans to expand business; Rs. 5000/- - Rs. 10,000/- is too little a
sum; Need self employment trainings
3. Reasons for success of micro finance model in Behragora

1. Social Facilitation: The Self Help Groups have been established with female group members. In
most cases the SHG members knew each other even before the SHG was established. This has
created a social facilitation effect amongst the members. Each member becomes responsible to
the group in generating an income and a profit from her business and repaying the next
instalment due by her. As per our discussion with members of Kalamandir, there has been no
significant loan default by an SHG in Behraghora. In case a particular member is unable to pay an
instalment, the SHG as a whole will contribute and recover the amount later. SHGs, thus, by
their nature of being closely knit groups are more credible. This fact was also appreciated by
two bank managers we met during our stay in Behraghora.

2. Communication within the SHG: Formal meetings are held regularly, chaired by an NGO
member from Kalamandir. Here all issues related to funding and basic business operations are
discussed. Since the businesses are rather small scale and buy-and-sell type of operations, other
members are able to pitch in and advise a fellow member in case of difficulties

3. Local facilitators: The representatives from the NGO Kalamandir are locals who reside in
Behraghora. They have deep knowledge of the small scale business scene, credit sources, politics
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etc. in the local context. They also personally know a majority of the SHG members. This has
contributed to the success of local SHGs

4. Markets: Behraghora sub-district population is 153051 [1]. There is a large and guaranteed
market present for even niche and small goods such as decorated sarees and other marriage
fineries, incense sticks etc. Almost all SHG members we spoke to were satisfied with the size of
the local market and were confident of increased sales if capital were made available to expand
business. Furthermore, NH33 passing through Behraghora is planned to be made into a 4 lane
highway from the current 2 - lane. Behraghora is also the junction of NH33 and AH46 from
Kolkata. Most business owners were optimistic about this on their future business prospects.

5. Family involvement: From our discussions it was evident that male members of the families of
SHG members encouraged the businesses run by women folk, to the extent of becoming
employees themselves. In 3 of the establishments we visited, the business was run exclusively by
the male members.
4. Role of Banks and NGOs

SHG-Bank linkage programme was started with the objective of extending the outreach of banking
to the poor, who mainly comprise the marginal farmers, landless labourers, artisans and craftsmen
and others engaged in small businesses such as hawking and vending. However the banking system
is still hesitant on various grounds (primarily due to fund diversion by SHGs & difficulty in recovery
once they becomes NPAs)to purvey credit to the poor and low income groups especially in the rural
areas. Some policy suggestions emerging from the above analysis are as follows:
1) Make approvals to all SHG loan applications mandatory where NGOs provide training &
have tie up for marketing.(in case all the members in the SHG doesnt have a default history)
2) The loans should be given to them in a structured manner(say Rs 50,000/- for the first loan
,Rs 1,00,000/- in case of successful repayment of the first & so on up to Rs 2 lakhs)
3) Make all the loans given to SHGs compulsorily insured.
4) To ensure non diversion of funds the eligibility should be confined to SHGs with BPL Women
Aadhar holders & the same should be duly recorded in CIBIL
NGOs can act as a link between the rural poor and the bank .The NGOs should also play a key role in
arranging training & tie up for marketing, failing which the members of SHGs may lose their
motivation and the sustainability of the micro enterprises may be affected in the long run.




[1] Census 2011, accessed at http://www.censusindia.gov.in/pca/SearchDetails.aspx?Id=381685 on
23/06/14
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5. Recommendations and Way forward

The micro financing initiative of Kalamandir foundation has been a success at Baharagora Village on
parameters such as coverage, inclusion and viability of the program. The program currently is used
as to achieve the goal of poverty alleviation but it can be effectively used as a tool of empowerment
and upliftment of the community as a whole. The below proposed steps can help achieve this
objective. This section captures the recommendation of the field visit.
1. Training at the Local Level
Currently training (skill or product development) at the local level is not provided at all. The
beneficiary (women) either has to travel to Jamshedpur (100 Kms) and stay there for the entire
duration of training (ranging from 5 to 15 days) to learn or hone a skill. As this initiative is for women
only, it is all the more difficult for them to make this travel as they cannot leave their household
duties for such long duration. Because of this, they are forced to start their business in certain
activities which require low skills and zero value addition, thereby resulting in very low profits (like
trading activities, retail shops etc.). It is absolutely imperative that the skill development activities for
the target audience (women in this case) have to be done at the local level. Only once the
community as a whole sees the benefit of such activities, there will be enough awareness and
incentive for the women to travel to the outstation training centre. A possible way to carry out this
activity is to have tie ups with organizations to conduct training activities at the village or increase
volunteer driven activities.
2. Self Help Groups
Beneficiaries can be organised into various clusters of the same activity/product they are producing
so that they can learn from experience of everyone around them. This initiative can also help to
collectively market their product, thereby securing a better product price and also achieve certain
economies of scale. However, profitability should remain individual centric.
3. Lucrative Business Activities
Provide adequate guidance to the women in deciding the business they want to start. Most of the
activities picked by beneficiaries are mere extension of their husbands business or some trading
activity. With guidance by the Local chapter leader, certain products or activities that are profitable
or have certain governmental schemes running can be picked by for the women.
4. Awareness Programs
The objective of the program should not only be to make the women self-reliant economically but of
welfare of the entire community. Various welfare schemes are run by both Central and State
government which most of the villagers and beneficiaries are not aware of. Local chapter leaders can
play an important role here. The entire community should be made aware of schemes on few key
areas such as Health, Education, Agriculture, Employment etc.
If the community starts availing the welfare programs run by the government effectively, the focus
of the Kalamandir foundation can be shifted to other pressing areas.
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In order to carry out this activity, the local co-ordinators would need to be periodically updated
about such schemes and their updated status. This activity has to be done from the headquarters.
5. Collaboration with Banks
In Baharagora Village, there are at least 2 National Banks present whose support can be actively
sought by Kalamandir foundation. These banks can complement the work done so far. During our
discussions with the Bank authorities, it was discovered that the banks have not been able to extend
any support primarily because they are not aware of the credit worthiness of the person who seeks
loan and also not many people have come forward with proper documentation.
To overcome this problem, an arrangement can be worked out with the banks such that any
beneficiary who goes for 4th or 5th round of funding can be brought to the bank for loan. Since the
credit worthiness of the person and viability of the business has already been verified in the
preceding rounds, the banks would be comfortable to provide loan to the concerned person. This
activity will also free up the limited capital available with Kalamandir community so that it can be
deployed elsewhere.
In addition, conducting workshops with help of bank staff on education of community on the
benefits of opening a bank account and operating it periodically can also be conducted.
6. Our Contributions

During our interactions with the villagers on micro financing and its impact on business, we came to
know about their literacy level as well as their ignorance level. We decided to take up the task of
creating awareness of:
Importance of education: Most of the villagers engaged in any kind of commercial activities through
self-help groups were under educated. We emphasized that education is the only tool which would
enable them and their children to live a better life.
Skill development programs and trainings: We encouraged them to participate in skill development
trainings either through government run institutions or through private authorities. Once they have
skill, they can employ it for their business as well as they can share their knowledge with other
villagers.NGO coordinators may also support them in training programs.
Government schemes for rural upliftment: Though competent, but most of the village SHG
members were not aware of the government run schemes of rural development such as
PMGSY.We told them about these schemes and they promised to follow up on it.
Dynamics of markets and marketing: We told them how the markets work and how important it is
to access the market to maximize their sales. We also made them aware of the importance of
marketing in a scenario where product is directly getting sold to the consumers.
Role of banks in further support: Since NGOs have a limited quota of loan per person; it is in the
interest of villagers to contact banks for greater sum of money.NGO representatives can play a role
of mediator between the bank and the loan applicant.

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7. Closure Comments

Although it is different from normal SHG, the evolved SHG model in behragora and the micro
financing model can be replicated in other rural areas. The important point to keep in mind would be
that model should enhance the existing skills of villagers and add a new source of income to uplift
their socio-economic conditions and to align their activities towards national goals.






















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8. APPENDIX

Baharagora is the entry point of Jharkhand from the two states, namely West Bengal and Orissa.
Since it is located at the border, West Bengal is approx 12 km and Orissa is approx 7 km from there.
Although the official language of the state is Hindi, the local language in the area is a blend of
Bengali and Oriya. Except some government employees, all localities use either Bengali or Oriya as
primary mode of education. In the erstwhile state of Bihar, textbooks were also released in Bengali
and Oriya.
Kalamandir
Kalamandir operates with a vision to foster necessity and accessibility of arts and aesthetics in our
day to day social life. Its area of operation lies in districts of East Singhbhum and Seraikela-
Kharsawan of Jharkhand and its main activities include:
To undertake research / survey on Tribal heritage and the different forms of expression such
as paintings, songs and dances.
To act as a Resource Center to document and disseminate information related to different
linguistic, ethnic and regional communities of Jharkhand and also to create awareness
among them against all socio-economic evils.
To create infrastructure and institution in the rural areas for development of sustainable
livelihood through creation of micro-enterprises for the tribal / folk / regional cultural
heritage of Jharkhand and preserve this.
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