1. Sustainability is one of those words that are subject to various interpretations depending on the field of expertise of the interpreter or the ideological lens that he/she uses during interpretation. Other similar words open to various interpretations are “participation” in the development field and “god” in the religious. Let us give a few examples:

• From a Bankers’ perspective an SAG is “sustainable” if it continues to function primarily (and often only) as a financial institution or rather as a “micro-micro finance” institution. Bankers are more concerned about the number of loans extended by Banks to SAGs and the rate of repayment. Within this framework, Bankers envision a second level tier (a federation or grouping of SAGs) as a logical next step in order to harness the advantages of scale and standardisation, to reduce the level of risk that a widely decentralised community based system is exposed to, (in their opinion) and to introduce a degree of supervision required to “sustain” institutions managing finance. Analysts of the history of co-operative societies abroad, present their progress towards federalising as an example to be followed since, in their opinion, “ community based financial institutions” have failed where the second level tier did not develop. Understandably, in their view, the major (and often only) function of the second tier (and probably third tier) is to manage finance. Bankers follow this line of thinking.
• Economists also view the SAGs from the Bankers perspective, but highlight issues related to the need to add value to products and to establish appropriate marketing systems, infrastructure and linkages; more importantly they want to know the value of the product and the increase in income generated, rather than the rate of disbursement of credit and the performance in repayment which are the Bankers’ major concerns. Economists’ concerns also focus on the need for larger loans to sustain livelihoods –the loans given by SAGs to their members are often considered too small to generate adequate and sustained income; they also tend to view SAGs as instruments that are appropriate to “smooth over consumption needs” rather than as sources of adequate credit to lift the member out of poverty.
• Colleagues in Myrada take a different view; they focus on the “power that poor people generate and use by choosing to build their institutions on the basis of affinity among members”, and to establish these institutions as independent bodies with their own rules and functions. NGOs help to build these institutions through intensive training for all the members in organisational and financial management. Myrada ’s analysis shows that this experience in managing the SAGs gives them the confidence and skill to change relations and situations which obstruct their progress, to increase their control over resources and to build new linkages among themselves and with other institutions and to acquire new skills. Temporary “project” interventions focused mainly on individuals, make it possible for some of them to progress, but this is achieved through a high level of patronisation by NGOs or through subsidy/political support; once this support is withdrawn the poor generally slip backwards to previous positions since they are unable to cope on their own. They are comparable to a butterfly which has been assisted by outsiders to emerge from its chrysalis so that it does not have to struggle to emerge; nature has ordained that its struggle to exit is necessary to strengthen its wings; deprived of this struggle it falls to the ground. The functioning of affinity groups provides each member with the space to strengthen her/his wings.

Myrada ’s staff who have worked in Government projects sponsored by Multilateral/Bilateral organisations, appreciate the importance given by these organisations to participation; however in the implementation of the project, participation is time bound by the project period, is reduced to establishing a silent “consensus” and avoids any form of debate or tension between the power structure and the poor. The strategy of participation originated from the Marxist dialectic, but the power of this dialectic to empower the poor has been castrated and reduced to a deadening demand for statistics related to the number of trainings given within the shortest period possible.

2. Myrada would say that power plays a critical role both in keeping people in poverty (or returning them to this state after temporary project interventions) as well as in liberating them from the poverty cycle. For Myrada ”it is not enough to teach the poor people to fish when they cannot reach the river”; the obstacles on the way relate to relations which are oppressive and exclusive like caste, to relations which force them to be dependent for their essential needs – for example they need to borrow money to survive on the way and end up working to repay the debt all their lives, to the lack of basic skills like literacy –they cannot read the sign posts to the river, to unequal gender relations –the women carry a heavier load and therefore move slower, and finally when they get o the river they find that the fishing rights have already been captured. Myrada highlights the need for sustained group action both at the level of each group as well as in federations to overcome these hurdles. Myrada therefore, would ask whether the SAGs have built up the social capital which is adequate to introduce and sustain changes in society and at home to build adequate skills and linkages - which enables each poor member to build a sustainable livelihood base. Myrada recognises the value of SAGs possessing and managing finance, but it focuses more on the SAGs skills in the management of finance than on its provision, since it believes that it is the management of finance in a transparent and fair manner which is empowering rather than its provision, at least in the first stage of development. The approach of Myrada to apex organisations and to micro enterprises will be discussed later in this paper.

3. Given the difference in perspectives, it will be useful to begin by defining what sustainability means in the context of SAGs through the lens that Myrada has viewed it all these years – in fact since 1985-86 when the SAG movement began to take shape within Myrada’s projects.

4. Myrada has always focused on the sustainability of impact on individual members of SAGs as the goal of its interventions, and not on the sustainability of the SAG itself. However, the two are linked, since experience indicates that an SAG has to perform well for at least 6-8 years in order to provide each member with the space and opportunities he/she requires to build a livelihood base and the linkages such a base requires to be sustainable. The sustainability of an SAG was assessed on its potential to support the SAG member to achieve a livelihood base from where he/she could take off. The Rural Management Papers (RMS Series, authored by several colleagues in Myrada), dealing with SAGs that appeared periodically throughout the late 80s and early 90s have repeatedly stated that SAGs are not the final answer that will continue forever. Hence the sustainability of SAGs in this sense was never an issue or a goal. On the contrary, SAGs were expected to provide members the support to take the first step (which could be larger or smaller depending on the base line and the potential of each member as well as on the opportunities available) – and thereafter, either remain and evolve to meet emerging requirements under changing circumstances or dissolve amicably (and professionally!), having served a purpose. Therefore Myrada trained the SAGs to assess their performance regularly and to categorise themselves as “good”, “average” or “poor”, depending on their performance in supporting each member financially and organisationally and on their success in changing oppressive relations and overcoming hurdles.

5. Myrada did not adopt a position that the whole SAG should move towards larger and more profitable enterprises. On the contrary, the SAG gives each member the freedom and support to move at her/his pace. Proof that this was indeed closer to the situation on the ground was the evidence gathered from an analysis of the purposes of loans that showed that even in the first year some members of SAGs took loans for income generating activities while others preferred to wait for a year or even for two during which they borrowed to repay loans taken to moneylenders, for health, food and other social needs. The data also showed that several SAGs were giving large loans to members - even up to Rs.30,000 after a period of 3-4 years. With close to two decades of SAG experience behind us, it seems like a good time to look around and see what has actually happened to the SAGs that had been formed by us ‘a long time ago’.

As of December 31, 2004, Myrada has promoted 8907 SAGs in all its projects in three States of South India. They have a total capital in their separate Common Funds of Rs.119.4 crores, of which Rs. 42.6 crores is their savings and Rs. 21.1 crores the interest earned on loans to members. Besides these SAGs, Myrada has supported the formation of SAGs in several parts of India including Haryana and the North East through NABARD and in IFAD’s, projects, in Bangladesh and Myanmar through UNDP, in Cambodia through several NGOs, in Indonesia through IFAD ;other countries where training of local staff is underway are East Timor through several projects supervised by UNOPS and recently a small effort has started in Iran through IFAD. The following analysis is based on lessons drawn from this experience.

6. Sustainability of an SAG for Myrada has been viewed with reference to its performance, more specifically with reference to its ability to function effectively for about 6-8 years. The period of 6-8 years is not an arbitrary choice but roughly the time required for capacity building and empowerment processes to be personally experienced by each member through challenges faced in their lives, and for each member to go through at least 5 to 6 loan cycles with incremental loan sizes.

7. By “effective functioning” we mean that the SAG demonstrates all the characteristics of a well-managed institution that is transparent, democratic and professional in its functioning. Such an SAG not only helps each member to get a secure footing on the path to livelihood development and economic growth, but it also builds confidence in each member to accept and face the many challenges of life without giving in to feelings of vulnerability and stress. Its institutional strengths forge relationships of trust and mutual support between members that are sustained for as long as they feel the need to hold together as a group. Functioning Effectively therefore implies for Myrada in the context of an SAG:

a. That the SAG is able to help each member to take the first concrete step at least towards building a sustainable livelihood base,

b. That its institutional strengths enable it to build stronger relations of trust, mutual support and commitment to promote a common good among its members and to acquire greater skills in order to support new and more complex functions and relations/linkages in response to emerging needs and priorities of the members during these 6-8 years,

8. However, as the SAGs developed, they took several decisions, some of which we began to use as indicators of the level of their ability to function effectively. For example, many SAGs, (in order to meet emerging situations some of which were perceived as threats and others as opportunities), decided to re-engineer themselves and/or to become a part of networks or apex institutions that have a much broader role than one of financial intermediation. Experience in Myrada has shown that these developments have taken place usually after 6 years of effective functioning. We therefore added two more features to our understanding of what “functioning effectively” means.

a. The SAG’s ability to re-engineer itself in a professional and businesslike manner; our experience with SAGs is that in several cases they undertake this re-engineering if they decide to take on new roles to utilise perceived opportunities; they also reengineer themselves if they feel the need to allow some members to leave or to divide the common fund which has grown too large and is attracting attention; they view both these developments as threats and

b. The SAG’s ability to set up and support (organisationally and financially) new apex institutions which provide services that the members of the SAG require to meet their emerging needs. Our experience indicates that this development occurs when the supporting NGO withdraws or winds down its programme in the area. It also occurs when the NGO continues in the area, but the SAGs decide that they would like to set up an independent institution over which they have control but in which they would like Myrada to participate in some way, usually by pacing an experienced staff in whom they have confidence. The Federations which emerged in the mid nineties and the Community managed Resource Centres which emerged in 2002 are examples. Our experience indicates that the SAGs which have decided to form these apex institutions have given them a much broader role than one of financial intermediation. In fact none of the apex bodies formed by the SAGs has been given the role of financial intermediation. The SAGs prefer to relate directly with the Banks or with MFIs.

9. Before proceeding further with an analysis of the “sustainability of SAGs, it may be useful to describe what Myrada understands by an SAG; this is important since over the past 5 years the name Self Help Groups has been given to all kinds of groups. Even worse, in most States, groups were formed in a hurry to achieve targets, membership was based on externally set criteria for membership, not on affinity. Further hardly any investment has been made in the institutional capacity building of the group; instead, allocations for training groups have been spent on organising large gatherings, promoting political rallies and at most in conducting one day sessions for leaders of Self Help Groups to introduce them to the “scheme” or a “project”. To a large extent the Self Help Group movement has been taken over by official government agencies which have little experience in and less time to invest in building institutions; Government views all groups as extensions of their delivery system to carry out a programme, and not as people’s institutions in their own right –the only exception was the RBI and NABARD’s recognition of Self Help Groups as independent institutions in the context of finance management; it is precisely because of this recognition that the Self Help Group movement – largely devoted only to the micro finance management component - has spread throughout the country.

10. The history of how they emerged may shed some light on Myrada’s interpretation. Between 1983 and 1985 several of the Co-operativeSocieties<2> started by Myrada with over 100 members broke up because of lack of confidence in the leadership and poor management. Members met Myrada staff in small groups; they expressed their willingness to repay their loans to Myrada, but not to the Co-operative Society, which was a large and heterogeneous group and dominated by one or two individuals. We informed them that they had not taken the loans from Myrada; hence the issue of repayment to Myrada did not arise. We asked: “Why not repay to the small group of people assembled here?” They agreed. The large Co-operative broke down into several small groups and the group members repaid their loans to whichever group they chose to join. Thus was born the first set of “Self Help Affinity Groups”.<3>On analysis, Myrada realised that there was a strong feeling of “affinity” which linked the members of each of these small groups together. This affinity was based mainly on relationship s of trust, relations that were non-exploitative, on certain social features (like a degree of homogeneity among the members, of voluntarism and self reliance and willingness to support one another in need), on certain structural features like a common origin (blood or ancestral village) or the same livelihood base (all daily wage earners, landless or marginal farmers, even though from different castes, religions or communities), on gender bonds (all women, or all men, though about 5% of the groups were mixed). In a few cases they were based on similar activities undertaken by each member (like basket weavers – though caste also had a role to play here; besides a large group of households undertaking a similar activity often decided to break up into smaller groups of 10-15 on the basis of affinity). Interestingly no groups were formed on the basis of political party affiliations. Briefly, the affinity groups were unpolished

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<1>1. Myrada is an NGO with 450 staff working directly with 1.5 million poor; “Building poor people’s institutions” is its short mission statement. It manages 15 major projects in three Indian States and has major involvements in 3 others where it has deputed staff to Government or conducts regular training and visits. Its major activities are promoting self help affinity groups, watershed, water and wasteland management, forestry, community management of sanitation and drinking water, housing and habitat, improvement of primary school education, technical skills for school dropouts, micro enterprise generation, preventative health care, a major HIV/AIDS prevention programme. It manages 10 Training Centres, all based in its projects. It started an MFI called Sanghamithra which lends directly to SAGs. Besides, it is involved with bilateral and multilateral organisations in Myanmar, Cambodia, Indonesia, East Timor, Vietnam and Bangladesh largely in promoting the self help group strategy and participatory approaches to natural resources management; website: www.myrada.org

<2>2. The Cooperative Societies in the rural areas at the primary level are composed of better off and poor, dominated by the landed, especially by the farmers who have irrigation, and usually controlled by aspiring local politicians who use these societies as a stepping stone for their rise in politics. Several studies of these societies have been conducted by committees set up by Government. They all agree on the reasons for the poor performance of these Cooperatives, namely: poor governance, the lack of adequate supervision and the excessive influence of politicians which has resulted in most of these societies incurring regular loss; there are examples of success, but they are few and are due either to their leaders capturing political power which they use to further the Societies’ interests or because of dedicated individuals; demands for recapitalisation by political parties have been a major and recurrent feature.

<3>3. Subsequently Myrada identifies affinity groups through the following process: It conducts PRA exercises like wealth ranking which helps people to identify who are the poor and poorest in the village; then sessions are held with this group to explain to them what affinity means; they are then requested to form groups on their own based on affinity among members.

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diamonds hidden under stones we just happened to kick these stones aside by accident; all that we can be credited for is that we stopped to look, to learn, to identify people’s strengths or the potential of the diamond and then to build on them.

When these affinity based groups emerged in Myrada in 1984, they were called Credit Management Groups; the focus was on management of savings and credit rather than on the provision of credit; when Myrada entered into a contract with NABARD in 1986-1987 to take up a pilot project to promote these groups, the name was changed to Self Help Groups; several studies were carried out between 1988 and 1990 to assess whether the SHGs really offered a sound alternate credit strategy which could be accepted by official institutions. This was accepted in 1990 by the Reserve Bank and NABARD launched the Bank Linkage Scheme in 1992 whereby the banks extended loans directly to groups –not to individuals in groups – without asking for the purpose of the loan to the individual member in advance. In the late 1990s the SHG strategy was accepted by the Government of India as a major programme to mitigate poverty; funds were allocated in the Budget; targets were set and groups promoted by Government all over the country often without adequate capacity building. It was then that Myrada changed the name to Self Help Affinity Groups or SAGs.In this paper, these groups will be referred to as SAGs instead of SHGs; this distinction will helpto focus on the affinity required to bind the members as well as to distinguish between genuine self help groups and those groups that were formed under pressure to achieve targets, which were given grants a few days after formation with little or no investment in institutional capacity building and whose membership is based on external criteria rather than on affinity.

Identifying affinity groups is only the first step. More important is the investment required to build the institutional capacity of these groups. This is where most of the Government sponsored group’s fail, as Government Departments do not realise the importance of building people’s institutions; they either assume that they exist or that their function is to implement Government programmes. In several cases only the leaders of the groups are trained, thus increasing the gap between them and the others. The Capacity Building Modules which Myrada offers to all the members of each SAG over a period of 12 to 16 months include: 1. A structural analysis of Society; 2. Analysis of local credit sources; 3. Self-Help Affinity Group – A concept; 4. How a meeting of the Community Based Organisation is conducted; 5. Communication; 6. Affinity; 7. Vision Building; 8. Organisational Goals; 9. Planning, Resource Mobilisation, Implementation, Monitoring & Evaluation (PRIME); 10. Rules and Regulations; 11. Responsibilities of Group Members; 12. Bookkeeping and Auditing; 13. Leadership; 14. Conflict Resolution; 15. Collective Decision Making; 16. Common Fund Management; 17. Self-Assessment; 18. Group Graduation; 19. Linkages with other Institutions; 20. Building Credit Linkages; 21. Federations; 22. Credit Plus, and 23. Analysing Gender Relations in the Family and Community. These modules have been published in a training manual entitled “The Myrada Experience: A Manual for Capacity Building of Self Help Affinity Groups” which has been translated into several languages.

13. This approach also flows from Myrada’s vision and the strategy for empowerment that it endeavours to promote. It builds on people’s strengths not on their needs. What are their strengths? Examples are: relationships of affinity which existed before Myrada ’s intervention, willingness to make sacrificial savings once they are confident that the savings are safe and can be easily accessed for their priorities, value for a common good which they are willing to promote (instead of competing) if they perceive that they can control its use and benefit from it socially and/or economically (the common fund of the SAG is a major example)<4>

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<4>4. Myrada does not consider quick increases in household income as the primary objective of its micro finance (savings and credit) strategy. It has other and equally important objectives, namely empowerment of the members both as a group and as individuals. Myrada’s strategy is to use finance management as an instrument of institution building, which in turn lays the basis for empowerment. The pace and progress of the empowerment of individuals however differs from member to member. In some cases individual members leave the group after 6 to 8 years; they are able to hold their own in society, have confidence to forge and maintain linkages with other institutions and service providers and relate directly for larger loans with the Bank, which had previously extended a line of credit to the group to which the member belonged. In other cases, they are accepted by traditional “chit fund” groups which save and lend to the highest bidder with the organiser enjoying certain privileges. These members report that they themselves did not have the confidence to join these traditional groups (or for that matter to approach the Banks), prior to their membership and experience in the affinity group which gave them an opportunity to increase their incomes and a degree of credibility.

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14. Myrada realises that for practical reasons, groups will continue to be formed within the context of a “project”, yet, to reduce the negative impact on institutional building that this project context with its time bound agenda and priority to disbursement and physical indicators (even for participative processes) imposes, it is important to ensure the following: (i) groups need to be formed on the basis of affinity, not on the criteria for beneficiary selection –this requires a change in the traditional approach to costing of the community organisation component which is guided by the number of beneficiaries. (ii). At least six to eight months must be devoted to institutional capacity building before the group is asked to prepare plans for investment in infrastructure or to apply for grants for individual assets. (iii) During this period a significant investment in capacity building is required; this should focus on helping the group to build a vision and a strategy which is not limited by the “project” on hand, but by what the group envisages in the long term. (iv) If the project envisages provision of credit, the group should be assessed on the basis of its institutional strengths (not on the viability of each individual loan) and a line of credit provided to the group, leaving the group to decide on the purpose of each loan, on the interest rates, repayment schedules, and on sanctions where members fail to conform to agreed schedules or accepted norms of social behaviour.

Institutions, by themselves, do not empower. In fact they have the potential to disempower if their structure is inappropriate, if they are used as implementers of programmes designed by others, if they are forced to follow the timetable and agenda of the project managers, and if their systems are inflexible and unresponsive to emerging situations (threats and/or opportunities). They also disempower if the official organisational and financial management systems are imposed on them and standardised. Myrada holds the position that these groups should not be ‘mainstreamed’ by the official institutions; on the contrary the official institutions should recognise the emerging groups and respect their systems provided they are transparent and adequate. Mainstreaming is disempowering when the mainstream imposes its system and culture. Genuine people’s institutions provide the space within which the poor can build up their confidence and skills to establish relationships with other institutions on an equal footing .

15. In this scenario, an SAG was deemed to be “sustainable” if it functions well enough to achieve the goal of each member’s self-development; no one in the SAG can be left out. Sustainability, therefore, was not understood in the sense that the SAG would live forever. In fact if it lived forever and continued to perform the same functions, it would indicate that it was not really sustainable, in the sense that it did not have the inner institutional strength to morph into new institutions or group into new federations and undertake new roles and functions to respond of emerging situations. To return toour understanding of the features of an SAG which is functioning effectively .

16. Confidence to take decisions that each member has not been able or accustomed to is not built in a flash of revelation; it takes time and more importantly the variations of experience. The period of 6-8 years is not an arbitrary choice but roughly the time required for capacity building and empowerment processes to be personally experienced by each member (who started out by being identified by the village as “poor”) through challenges faced in managing SAGs; this experience in turn affects their lives, at home and in society; this period of 6-8 years is also required for each member to go through at least 5 to 6 loan cycles with incremental loan sizes.

Myrada focuses not only on the provision of credit but more on the management of credit and the ability to change social relations and establish new linkages; studies indicate that it is the experience gained in managing credit and in influencing the supporting environment that empowers – not just the provision of credit. Gathering this experience and profiting from it, therefore takes time. Myrada believes that given the social, political and economic hurdles that the poor have to negotiate, it is not enough to teach people to fish when individually they cannot reach the river. Sustained and effective group action, particularly by the members of each SAG and later by several SAGs together, has helped to overcome most of these hurdles.

17. A key instrument in promoting effective functioning is regular assessment of the SAG carried out in a participatory manner. Part of the monitoring system set up within Myrada is to train SAG members to assess themselves. The key domains are: organisational and financial managements, organisational accountability, ability to establish linkages, to learn and evaluate and to have a vision/mission. This assessment is done in a participatory manner with staff from Myrada assisting the SAG; often members of more experienced SAGs also participate. The criteria for assessment includes social and organisational indicators (like changes in gender relations at home and in society, issues related to effective participation of all members indecision making, change in SAG leaders/representatives) as well as financial indicators related to access to loans (whether all had accessed loans and maintained the discipline of repayments as decided by the group, or were there significant biases that were not addressed, changes in the purposes and size of loans for example, if the loans for consumption which were larger in number during the first year or two decreased after that; changes in size of loans are other criteria<5>.

18. Basically this means that the members have borrowed for income generating projects, not once but many times. The loans may be small, but several have been taken over a period of 6-8 years. This feature needs to be stressed, because one regularly finds comments (often disparaging) in well-authored papers that the SAGs only “smoothen consumption needs”. This is not a true picture. Data from one Myrada project (Dharmapuri) which is in a drought prone area reveals the following:

19. The data covers 1815 SAGs (Total Common Fund is Rs.174 million of which Rs.73 million is savings and Rs.53 million is interest earned on loans). The data indicates that the total number of loans given is 147,128 of which 36,222 were for agriculture, 56 for agricultural equipment, 438 for irrigation, 1256 for land development, 25 for bullocks, 13290 for cow/buffalo, 73 for poultry, 22 for piggery, 1204 for sheep, 566 for cottage industries, 4224 for petty business and trading, 210 for sericulture and 6290 to repay loans taken from money lenders at high interest rates. The largest averages per loan were: Rs.18,252 for equipment, Rs.12,021 for poultry, Rs.7,310 for Petty business/trading and Rs.6,617 for cottage industries. These are not large loans; but are comparable (and even greater) to the average size of loans provided by well-known MFIs. Further, the same members took several such small loans over 6-8 years. To say that SAGs only provide loans for consumption smoothening is therefore not quite correct. What is even more intriguing is that several highly paid Livelihood Consultants who made field studies of what livelihoods projects should promote come up with a similar –though less exhaustive list than the purposes of loans taken by SAG members. When economists refer to “output” therefore, they have to assess the income generated from all the categories of loans taken by individual members as described above and not only from common activities of SAGs like products which are exhibited at occasional melas organised by Government. There is also an assumption that all the members in an SAG graduate together from consumption loans to income generating activities. This assumption is not substantiated by evidence. Many, members take loans for income generating activities even in the first year, while several continue to take loans for consumption (health, food religious and social ceremonies) for two – 3 years. Members start from different bases and graduate according to their chosen pace.

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<5> 5. For further details refer to Putting Institutions First Even in Micro Finance by this author and to Rural Management Systems Papers on SAGs which are available on our website).

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20. However, there is no doubt that after this first step where members take smaller loans, there is need to support the other steps towards larger enterprises that some members may opt to take. If the loans in the SAGs were for “income generating” purposes, the larger activities requiring more substantial investment required could be termed “micro enterprises” (agriculture based as well as on farm and off farm). These micro enterprises would require not only larger loans ranging above Rs.50,000, but often a regular line of credit; more importantly they would also require roads, power, water, transport and information systems. This is where we have major blocks. To given one example. Two members of an SAG recently asked for a loan of Rs.25,000 to start a small flour grinding business; the SAG sanctioned this loan. A month later they returned it to the SAG because they had to pay a bribe of Rs.10,000 to get an electric connection – how can micro enterprises succeed in a scenario of shortages of essential inputs like electricity, water, and adequate infrastructure and transport? Poverty cannot be eradicated without power (not just political power – which perhaps plays a disproportionate role in our affairs) to add value to products. For the poor to climb out of poverty and stay there, therefore, requires not only easy and quick access to resources but also adequate infrastructure, power, water and information. Adequate investment in these sectors is a matter of Government policies and priorities; the present level of investment in infrastructure is far from adequate. China for example invests over $30 billion annually, while India invests $2 billion only. As for power - 60% of the manufacturing units in India need to have captive power generating units. Let us not compare it with China (16%); perhaps comparison with Pakistan will be more effective – it is 42% there.

21. Given these shortages, it is difficult for an NGO to support the poor to take the next step from income generating investments using loans from SAGs to take up micro enterprises. Government’s policies and priorities are critical for the members to take this step. On farm micro enterprises related to agricultural product processing requires electricity on demand. The popular trend to invest in animal husbandry for milk often fails to take into account the shortage of fodder and water throughout the year. Non-farm enterprises enters a domain where NGOs are not comfortable and find it difficult to compete with the private sector, both with regard to design and marketing. Therefore Myrada decided to tie up in 1997 with the private sector. Of all our initiatives the one that has stood out is the collaboration with Titan Watches which outsourced the assembly/polishing of watchstraps, assembly to clocks and of gold jewellery. Myrada did not take up the contract but invested in organising and training people selected by the SAGs; Myrada also helped these SAGs to form their own company and supported it with one experienced staff. Titan provided the training, design and marketing. Myrada’s total investment was around Rs 12 lakhs. Today eight years later over 220 women own and run their company (MEADOW –Management of Enterprises and Development of Women), pay for the staff and have an annual turnover of over Rs.1 crore. Tie-ups with the private sector need to be factored into project design if micro enterprises are to be sustainable.

Myrada ’s overall strategy for progressing from income generating activities towards micro enterprises. This strategy has the following components: Provision of larger loans. Our experience indicates that Banks hesitated to give loans larger than Rs.25,000. Then Sanghamithra, the MFI promoted by Myrada started lending Rs.1 lakh to SAGs. Banks then raised their limit to Rs.50,000. Sanghamithra is today lending over Rs.3 lakhs to SAG; the Banks loans however have hovered around Rs.1 lakh except under programmes like the SGSY where they have been compelled to lend more. Analysis of the purposes of loans taken by SAG members: The software developed by Myrada helps us to identify patterns in the purposes of loans. The assumptions are that since the SAG member is not under any pressure to conform to predetermined loan purposes he/she is able to clearly state the purpose of the loan required without trying to make it fit to what is considered acceptable. Further, we know that the SAG checks whether the loan was used for the purpose mentioned at the meeting in order to establish the members credibility. If certain patterns emerge, our assumption is that there must be some comparative advantage. Note: we do not find that loans for similar purposes are taken by all the SAG members – a strategy which many Government programmes foster – but we do find that one or two members from several SAGs in a particular area take loans for similar purposes. For example we find that two or three members from each SAG in a particular area take loans for buying and selling hides or for small poultry units Myrada brings these members together and trains them; in the case of those buying and selling hides, training was given to do tanning; in the case of poultry, training focused on larger units and better management. These members return to their SAGs and borrow from there if they intend to invest further. Myrada also suggests that these members (not SAGs) can come together to purchase inputs or do marketing in bulk. However, the biggest stumbling block here to increase the portfolio of enterprises is the lack of infrastructure like cold storages, hygienic handling, power, water, markets which function transparently without middlemen who monopolise the trade and transport. Information is not a problem any longer as cell phones and telephone are available. Myrada also encourages the SAG members to stand for elections to the PRIs so that priorities can be given to investment at least in village roads and to lobby so that better management systems related to power and water can be introduced. Linkages with the private sector and markets are also promoted. The Community Managed Resource Centres play a major role in this area especially in agricultural and related products.

22. Reports from projects revealed that some SAGs had decided to restructure their membership as well as their common fund;. This was a rich source of learnings for Myrada . The findings from one rapid study of SAGs in Myrada ’s Chitradurga Project that have re-engineered themselves are briefly described below.

23. Several studies are in progress launched by Myrada as well as by the Micro finance group set up in the IIM-B in collaboration with Myrada. These studies focus on the SAGs which decided to re-engineer themselves. These studies have not been completed as yet; but one rapid study from Myrada’s Holalkere project has come in which provides some insights into this feature which can be presented here. The study conducted covered 35 groups which had “re-engineered” themselves. Of these 35 groups, (a) 6 groups decided to share their income component of the common fund which comprised membership fees, fines, interest or service charges, bank interest earned, donations and income earned from a few group activities and from visitors who came to study their functioning. They did not share their savings, but retained them in the common fund. After sharing the income component, all these groups started anew with all the members. There was no change in the membership. The reasons for their decision will be discussed below . (b) 3 groups decided to disband and to share their entire common fund. They started the group again, but a few members decided not to join (or were given a message that they were not welcome because they had not abided by the groups discipline) (c) A further 20 groups decided to divide only the interest earned from lending to members and the income from group income generating activities, but they did not distribute their savings, fines, donations from guests, bank interest. After this, all the members continued in the SAG; none were added and none left. (d) Finally, 6 groups disbanded and reorganised as Stree Shakti groups.<6> These were new groups (less than one and a half years old); each group receives a grant of Rs 5000. This was the major motivating factor.

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<6>6. This is a State Government Programme which started in 2000; a large number of SHGs were started and given grants of Rs 5000/- without adequate-often without any – training; in most cases where training was given, it was restricted only to the leaders; with the change in Government in 2004,the programme received a set back.

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24. Apart from the groups which joined the Stree Shakti programme, the other groups debated their decision over several meetings. They agreed on what part of the group’s common fund to divide and whether to continue functioning; members could decide to continue or to leave; there were however some cases where members who had not lived up to the groups expectations, were advised to leave. None of them took these decisions because of internal conflict which could not be resolved and therefore led to dissolution. These decisions were taken over a period of time and in a transparent and participative process.

25. The reasons for their decisions were the following:

• With reference to the SAGs in groups (a) and (c). Some of the groups were concerned throughout their existence, that members may not be able to repay large loans. Hence these groups limited the amount to a maximum of Rs.10,000. This resulted in accumulation of a large sum of money in the common fund which was placed in a local Bank. As long as the Bank interest was high, they were quite happy to leave the money in the Bank, but with the falling interest rates after 2001-2, they did not think it worthwhile to park the funds in the Banks. The groups, therefore decided to share a portion of the common fund. With due caution, it could be said that the members were quite aware that their savings had to be managed in a way that their yields were increased, on the other hand the hesitation to increase the size of loans did indicate a lack of confidence to take risks
• Other SAGs of these two categories (a) & (c) did not impose a limit to the loan amount to each member. Each of the members was given loans as per her necessity; in many cases Rs.50,000 had been given to the member who was regular and whose repayment was good. Yet the group had money accumulated in the common fund and decided to distribute part of it.
• In general, the reasons why the SAGs decided to distribute part of their common fund were the following:
  • Falling interest rates in Banks
  • Knowing that the group has a lot of money, many people from outside the group began to ask for donations; the group felt that if they continue accumulating money these requests will increase, hence they decided to distribute part of their common fund and restart.
  • Knowing that there were large sums of money in the common funds, husbands of some members began to pressure them to ask for larger loans which the members were not willing to give.
  • Members felt that the group is earning because of their investment of time and effort, and hence they should get a return for their investment; therefore, a portion of the groups own fund was distributed
  • Some groups had taken up “group income generating activities” periodically and earned profits which were invested in the common fund. After a period of five years they thought they should share this amount
• With reference to the three SAGs in group (b) which changed their membership, some of the members wanted to quit; they felt that they could manage with out the support of the group. Others were advised to leave. Hence it was decided to disband the group after sharing the entire common fund

26. In general however, it was clear that all the groups took decisions that were discussed and accepted by all; the result was that each member benefited from lump sums and the SAGs continued to function in many case even more effectively than before having gained from the experience of re-engineering in a professional manner. Myrada adopted this successful restructuring as an indicator of the SAG’s organisational strength which contributes considerably to its potential to continue functioning in a socio-political-economic context which is changing even more rapidly than before.

27. During discussions with SAGs, it emerged that they wanted some kind of Myrada’s presence in the area after withdrawal of the programmes. Myrada ’s, first reaction was that they have claimed to be functioning very well and therefore should be able to continue on their own. However, after further discussions, Myrada decided to retain a senior staff who was competent, who had experience in the area and in whom the people had confidence; Myrada however, made it clear that the staff should be willing to take on this responsibility and to report over a period of time to the management structure set up by the SAGs. Myrada in turn would ensure their emoluments till the SAGs could take over. Myrada suggested that the SAGs would have to group themselves on the basis of geographical proximity, set up a new management structure (and A management Committee) over which they had full control in terms of membership, functions, staff etc. and an Office for the Myrada staff and others who may be appointed by the SAGs. The Centres that eventually emerged were called Community Managed Resource Centres (CMRCs), each covering about 100-120 SAGs and in some cases Watershed management Institutions.<7> Local Government/Panchayats have donated land and buildings in many cases to establish the CMRC’s offices.

28. Since support for the staff will no longer be available, Myrada made it clear that the SAGs will have to pay for all services that this support structure provides so that over a period of time, the supporting staff and structure could be fully paid for from internally generated revenue. Till such time –a period of 3-4 years was identified – Myrada agreed to pay the salaries of the Myrada staff only. Myrada also agreed to train the Management Committees of the CMRCs, to help them to set up their accounting systems and records, to monitor monthly their statements of income and expenditure so that a clear picture emerged of their financial position, to help the Centres to prepare reports which indicated the services asked for and those that could be provided and to plan future strategy on the basis of this feedback and analysis and to conduct workshops and exchange visits so that the various Centres could share experiences and improve their management systems and performance.

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<7>7. For further details refer to RMS Paper 38

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29. It must be noted that in most project areas, while Myrada’s programmes were in full flow, SAGs had formed federations. The number of SAGs in one federation differed as the organisers left the choice to join or not to each SAG. The federations met regularly, usually monthly. Their structure and functions were decided by the SAGs. It was significant that none of the over 200 federations were given the function of managing finance. This was kept by each SAG which opted to relate directly with financial institutions for loans. The federations were asked by the SAGs to organise rallies and common action whenever required to lobby for peoples rights and needs; they were also asked to sort out issues which arose locally or to resolve them when they arose within the SAG. Each SAG contributed small amounts for the federation to function. The Federations were generally small, averaging between 15 to 20 SAGs. When the CMRCs emerged, they were larger, covering between 100-120 SAGs. In projects where the federations were working well, the CMRCs worked through them and functioned like their secretariat. In fact the CMRCs had a legislative body (the elected Committee), an executive ( Myrada staff and other resource persons directly recruited) which supported even the federations where the existed. Within 3 years 63 CMRCs have emerged in Myrada ’s projects of which 15 have already broken even including meeting the salaries of the Myrada staff.

30. The federations did not have permanent staff or offices which provided an adequate base. They could not afford to maintain executive staff on a regular basis. Once Myrada left the area or scaled down its services and staff, the federations found it difficult to employ regular staff since the SAGs refused to contribute adequate funds. Generally, Myrada felt that the SAGs are nervous that the federations, once they acquired funds, could easily be taken over by local politicians (once Myrada withdrew) to further their own interests and agendas; and hence hesitated from giving them funds. This was one reason why SAGs wanted Myrada to maintain some presence in the area – like keeping the sector officer who had worked in the area and had gained the confidence of the people - after the programmes were scaled down.

31. The following have been identified by evaluators as the core features of these Community Managed Resource Centres (CMRCs)

• The CMRCs governance structure, rules and functions are set up by them. In all cases, only institutions (community based organisations) are eligible for membership, not individuals. The majority of the CBOs who have opted for membership are the SAGs; but there are also Watershed Management Associations.
• Membership in the CMRC is not governed by geographical proximity alone or by the fact that the CBO was supported by Myrada . Membership depends on the quality of the CBO which is assessed by the CMRC in a participatory manner. The CBOs are assessed annually; if they fail to reach the standards required, they lose membership of the CMRC. Even if the CBO exists in the “service area” of the CMRC and even if it is a Myrada sponsored CBO, it does not become eligible automatically for membership. Interested NGOs in the area are approached to retrain such CBOs in order to bring them up to standard. SAGs formed by any NGO are eligible for membership, if they come up to the standard required by the CMRC.
• Each eligible member CBO pays a monthly membership fee to the CMRC which entitles it to certain services decided by the CMRC management committee. Most CMRCs have started with a figure of Rs.50 per month per CBO; this figure is emerging as the standard norm and it entitles the CBO to certain services which are mutually agreed upon.
• All other services are paid for on an ad hoc basis. (Examples of services given by the Community Managed Resource Centre are given below)
• The CMRC is managed by a Management Committee elected from the CBOs annually. The Management Committee meets monthly. Annual General Body meetings are held and printed annual reports and audited accounts are circulated.
• One CMRC serves around 100-120 CBOs; if more CBOs emerge another RC is formed to support them; the number of CBOs served depends on the distance; however CMRCs with less than 100 CBOs find it difficult to meet all costs at present. It costs around Rs.18,000 to Rs.20,000 per month to run a CMRC including the Myrada staff’s salary. CMRCs have to be supported financially till they become sustainable which takes about 3 years; in more remote areas it could take longer.
• The CMRC Manager must be competent, committed and with entrepreneurial skills who is trusted by the people; he/she reports to the RC Management Committee, The CMRC Manager is an experienced staff of Myrada who played a key role in promoting and training the CBOs and has good relationships with the CBOs in the area. After the NGO withdraws, he/she is engaged by the Community Managed Resource Centre, if the Committee is satisfied with her/his performance;
• The functions of each CMRC are determined by the demand coming from the CBO members. Each visitor enters his/her name and the purpose of his/her visit to the CMRC in a register which is analysed weekly to decide whether the CMRC can respond to a particular need. Each CMRC decides whether to respond to non-CBO members and if they decide to respond, on the terms and conditions. Most in fact respond to non-CBO members but charge higher rates for their services.
• Lending money has not been identified as a function of the CMRC – this has been left to the Financial Institutions.

32. An analysis of the services provided by the CMRCs fall in the following broad categories:

• Training for CBOs, mainly for SAGs, book writers, animators. These trainings are conducted initially by the CMRC Manager, however, within a few months trainers are selected from experienced SAG members. Several of these CMRCs have been asked by NGOs and Government Departments to conduct trainings for SAGs and paid for their services.
• Organisation of Camps and Campaigns: Examples are Health Camps, Dental Camps, Eye Camps, Cancer Detection and Advice Camps, Animal Husbandry Camps, RCH/STI/HIV-AIDS campaigns, Tuberculosis Campaigns, Legal Awareness Campaigns.
• Bringing up issues related to women’s harassment due to dowry, safety, domestic violence and helping to solve them. Some CMRCs have organised sex workers into affinity groups; these sex workers have willingly come forward since they were not approached as “sex workers” but as women living in the village who needed support.
• Information support and utilities: Many CMRCs provide members with updated prices of agricultural products in surrounding markets on a day-to-day basis. Members of CBOs and others visit the CMRC to use the Internet, fax, etc. They also approach the CMRC to help them to write applications for old age pensions and for other Government programmes.
• Mobilisation of Bank loans under the SHG Bank Linkage Programme and Government Schemes for Toilets, Bathrooms, Housing, Agricultural Inputs, Grain Storage, Rainwater Harvesting, etc.
• Insurance Services: The CMRCs mobilise Life Insurance, Animal Insurance and help to settle claims. They have mobilised sixteen thousand life insurance policies during the past 6 months.
• Service to CBOs: They help CBOs to sort out problems with accounts, arrange annual audits, and help them to grade themselves.
• The CMRCs have also begun to identify skilled Resource Persons who could train families in various livelihood skills particularly in off-farm enterprises.
• Several CMRCs have taken up agencies like gas cylinders, provision of agricultural inputs etc.