MPRLP UPDATE SERIES NO. 9 MICROFINANCE
Affordable financing to transform rural livelihoods MPRLP works with Panchayati Raj (decentralised government) institutions and Gram Sabhas to bring affordable financial services to the poorest rural villages, where people have little access to productive resources, such as land, water, improved technologies and microfinance. Being able to save, borrow, take out insurance and transfer money inexpensively is helping the poor to weather difficulties and take the first steps out of poverty by embarking on new activities to earn income or build assets.
Creating choices Currently, poor people have few options for saving, borrowing or transferring money, or buying insurance. Some get by by borrowing from money lenders, but fall into debt because of high interest rates; others aren't able to borrow money at all. If they had access to affordable financial services, the poor could borrow less, save more and gradually build up household assets. Self-help groups, cooperatives and Gram Sabhas owned and managed by the people can provide these kinds of service. MPRLP helps the poor understand the different types of financial services there are and works to extend affordable financial services to even the remotest areas. Working
Getting the saving habit. Photo: © MPRLP/Singh Rajawat
with NGOs, MPRLP also supports selfhelp groups in getting together and forming federations, which elsewhere have proved to be sustainable community financial institutions.
Community financial services As well as promoting community financial services through self-help groups and attracting financial
"MPRLP helps the poor understand the different types of financial services" The way forward The project is working in 2900 villages to achieve the following: Create, through the Gram Sabhas, greater awareness to improve the poor's access to pro-poor financial services by strengthening community-based institutions. Ensure, through the Gram Sabha, that women and the very poor, especially those who have no or limited livelihood opportunities, have access to financial services.
Invest, through the Gram Sabha, seed capital in microfinance institutions, in order to give people more choice by building and strengthening these institutions and attracting them to project areas. Promote at least 8000 selfhelp groups during the project (as of September 2010, 6500 had already been created), and link these groups with financial institutions. Encourage self-help group federations.
MADHYA PRADESH RURAL LIVELIHOODS PROJECT
institutions, MPRLP helps channel funds to Gram Kosh (village accounts) and works with Gram Sabhas. This has involved developing financial guidelines for Gram Sabhas that targets the poor, the destitute, women and self-help groups. The policy provides guidelines for financial management, setting up financial systems and training committees to manage loans and repayments. Training also helps Gram Sabhas and self-help groups negotiate the best terms with service providers, such as post offices, banks and insurance companies.
Self-help groups The project has set up or re-invigorated 5483 self-help groups (of which 71% of members are women and another 70% are classified as poor). The project also trained 680 Samooh Prerak (independent advisors) to provide dayto-day financial support to clusters of 30 to 35 self-help groups. By August 2010, the project's self-help groups had:
Built savings of Rs. 38.6 million from their regular earnings. Loaned Rs. 18.6 million to their members. Leveraged funds of Rs. 54.8 million from financial institutions. Begun to work together in federations in some districts.
Creating options Crop, weather and livestock insurance, personal insurance and inexpensive money transfers can help households weather shocks and stresses. But the poor often don't know that such options exist, so MPRLP provides information about them. For example, it advises them about insurance and how to submit claims, or about government schemes, such as the free
Achievements in Gram Sabha financing
A pro-poor financial policy for Gram Sabhas and a microfinance operational manual have been developed. All Gram Sabhas working with MPRLP recognise the importance of using best practice in financial management. All new Gram Sabha loans after 1 July 2009 conform to guidelines laid down in the microfinance operational manual. By August 2010, the Gram Sabhas had loaned Rs. 73.44 million to self-help groups, Rs. 117.38 million to livelihood promotion groups and Rs. 720.51 million to individuals. Through the Gram Sabhas, 2706 farmers have obtained Kisan credit cards, allowing them access as a group up to Rs. 4.25 crore. 30,844 others have submitted applications.
group insurance scheme for tendu leaf pickers. Taking advantage of these kinds of options, the poor can protect themselves from having to sell assets such as chickens or goats, or from having to cut back on food or take children out of school.
"The poor can protect themselves from having to sell assets"
Achievements in microfinance
In partnership with ACCESS, committee-based microfinance institutions have been promoted in Jhabua District and now cover 1200 families. In partnership with BISWA, the project has formed and trained 1621 self-help groups. BISWA has also provided credit support of Rs. 3.0 million to self-help groups.
Achievements in insurance
89,203 families are now covered under different insurance schemes.
Contact Telephone: +91-(0)755-2766812, 814, 815 Fax: +91-(0)755-2766818 Email: mprlp@mprlp.in Website: www.mprlp.in MPRLP is funded by the UK Department for International Development (DFID). This publication does not necessarily represent the views of the Department for International Development.