This report describes the ‘Action Research’ component of the study on ‘Meeting Infrastructure Needs of the Informal Sector through Microfinance in Urban India’. The Action Research component was designed to complement the four case studies of existing microfinance institutions providing credit for water supply and sanitation to poor women in the informal sector and to explore the practical requirements of microcredit for infrastructure. Action Research was carried out between December 1998 and April 1999. South Asia Region ACTION RESEARCH CREDIT CONNECTIONS Meeting the Infrastructure Needs of the Informal Sector through Microfinance in Urban India Gujarat Mahila Housing SEWA Trust
29
Embed
Meeting the Infrastructure Needs of the Informal Sector ... · Infrastructure Needs of the Informal Sector ... Needs of the Informal Sector through Microfinance in Urban India Gujarat
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
This report describesthe ‘Action Research’component of the studyon ‘MeetingInfrastructure Needs ofthe Informal Sectorthrough Microfinance inUrban India’.
The Action Researchcomponent wasdesigned to complementthe four case studies ofexisting microfinanceinstitutions providingcredit for water supplyand sanitation to poorwomen in the informalsector and to explore thepractical requirements ofmicrocredit forinfrastructure. ActionResearch was carriedout between December1998 and April 1999.
South Asia Region
ACTION RESEARCH
CREDIT CONNECTIONSMeeting the InfrastructureNeeds of the InformalSector through Microfinancein Urban India
Gujarat MahilaHousing SEWA Trust
Action Research: Introduction 3
Action Research: Phase I 5
Action Research: Phase II 15
Proposed Loan Process Maps 16
Proposed Housing and Infrastructure Loan System 18
Annexures I to VI 20
Contents
3
Rationale for theAction Research
There are a growing number ofemerging microfinance institutions
in urban India that are facilitatingpoor communities to access
improved shelter and servicesthrough the provision of small-
scale credit. These include credit topay for water connections,
handpumps, electricityconnections, construct toilets and
upgrade homes. Interestingly,microfinance institutions are
increasingly emerging in newpartnerships involving
municipalities, poor communitiesand various other partners such as
non-governmental organizationsand donor agencies involved in
slum upgradation projects. Loansfor community or individual on-site
infrastructure purposes are a fairlynew area in India. Pilot projects
involving community participationalong with an element of the
consumer’s own cash contribution(proportion of capital costs and
100 percent maintenance costs)
have shown high success rates inproviding improved infrastructure
to poor consumers. Four examplesof such success stories are
documented in the Field Notesattached.
Field-level interviews haveclearly demonstrated that demand
for credit is very high amongst theinformal sector poor. With
increasing demand at thegrassroots for better shelter and
services, small-scale loansaccessed from microfinance
institutions are an effectivefacilitating tool. However,
microfinance institutions face avariety of institutional problems in
accessing adequate funds for on-lending to poor communities.
Some of these are highlighted inthe Issues Paper which is also
enclosed.Besides the existing problems in
accessing adequate funds,microfinance institutions also face
another major difficulty. Due to thefact that shelter-related and
infrastructure loans are a new,
emerging sector coupled with theextremely high field-level demand
for such loan types, grassrootsinstitutions are often unable to
cope with the growth in the sector.Housing and infrastructure loans
are characterized by longerrepayment terms and are usually
of a relatively higher volume, ascompared to income generation or
consumption loans. Thisnecessitates access to bulk re-
finance from mainstream financeinstitutions for on-lending.
Traditional collateral such as landtitle deeds are also largely
unavailable within the informalsector, due to lack of legal land
tenure.Despite these distinguishing
characteristics, most microfinanceinstitutions have not yet developed
a specialized system for housingand infrastructure loans. They
have mostly been administered viathe same systems that are
applicable to other loan types.Given the specific characteristics of
Action Research: Introduction
The main objective of the Action Research was to:Develop a prototype housing and infrastructure finance department
model with appropriate accounting, reporting and loan evaluationsystems for financial institutions disbursing credit to poor women in theurban informal sector in India.
The Action Research was undertaken in two phases. Phase I of the Action Researchcomponent of this initiative was undertaken by working in partnership with SEWABank, Ahmedabad. Phase II involved the development of the prototype model, basedon the findings of Phase I. The methodology and findings of the Action Researchshould provide useful pointers to microfinance institutions around the country, on howto approach the establishment of specialized infrastructure and housing services.
4
this loan segment, as well as thegrowing size of the sector, it was
deemed useful to develop aprototype housing and
infrastructure loan department asan Action Research component to
this study.
Methodology
The Action Research initiativewas conducted in two phases:
Phase I: Housing FinanceNeeds Assessment Survey
Prior to tackling the main
objective of designing aspecialized system for housing
and infrastructure loans, a marketsurvey to clearly understand the
housing and infrastructure loanmarket that exists among the
target clientele of the micro-financing institution is required.
The results of such a survey maybe used in designing an
appropriate, demand-responsiveloaning system and to develop
appropriate loan products withrealistic terms and conditions
attached.Accordingly, a Needs
Assessment Study on the‘Housing Finance Needs of
Women in the Informal Sector,Ahmedabad City’ was undertaken
with the cooperation of SEWABank. Full details of the Study
along with an analysis of the mainfindings are elaborated upon in
the section entitled ‘ActionResearch: Phase I’.
Microfinance institutions wishingto carry out similar studies in other
cities may find the methodologyand format of the survey a useful
Following an analysis of theresults of the market survey, a
specialized housing andinfrastructure loan department
for financing institutionssupplying credit to women in
the urban informal sectorwas developed.
Full documentation of the newsystem, job responsibilities of the
related personnel and copies ofthe various forms to be used within
the loaning system are detailed inthe following section entitled
‘Action Research: Phase II’.This model has been developed
along with full documentation sothat it may be pre-tested, refined
and eventually replicated bymicrofinance institutions.
5
Introduction
This section of the report
describes Phase I of the ActionResearch: a market survey of the
housing and infrastructurefinance needs of poor women in
the informal sector. The surveywas designed and completed with
the help of SEWA Bank,Ahmedabad.
Objectives
l To assess the housing and
infrastructure finance needs ofpoor women in the informal sector
in Ahmedabad city. Issues such asthe specific purpose of taking
housing or infrastructure loans,the desired loan repayment
period and whether the cost ofcredit is more important or access
to credit is more important towomen in the informal sector, will
be addressed.l To provide information to SEWA
Bank, on the potential market thatexists for housing and
infrastructure loans withinits target and existing loan
clientele.l To specifically examine the
effect of housing and infrastructureloans on the income levels of
home-based workers.
Needs Assessment Study of the Housing and Infrastructure FinanceNeeds of Women in the Informal Sector, Ahmedabad
Research Team
The research study including
preparation of the questionnaireand analysis of data was
coordinated by Smita Ghatate,Consultant, SEWA Bank,
Ahmedabad.The field work was undertaken
and coordinated by the fieldworkers of SEWA Bank.
The study took four months forcompletion, ending in March
1999.
Use of Pre-testedQuestionnaire
A structured questionnaire was
prepared and pre-tested at thefield level. Necessary modifications
were made before the final surveywas undertaken. In addition,
field-level informal interviewswith the respondents were also
carried out.Annexure 1 contains a
reproduction of the questionnaireused for the survey.
Sample Base
In order to get a reasonable
sample base, 150 respondentswere interviewed for the needs
assessment study. Of these, 90
women had previously taken
housing, infrastructure or incomegeneration loans from SEWA Bank,
for amounts varying fromRs 5,000 to Rs 10,000. Thirty
women sampled were from threespecific areas of Ahmedabad,
namely Sanjay Nagar, SinheshwariNagar and Meldi Nagar. All three
areas are participants of the SlumNetworking or Parivartan
Program1. Thirty women residingin the same localities as the
Board of Directors of SEWA Bank,but yet to open accounts at the
Bank, were also selected for thesurvey.
Findings of the Survey
This section contains relevant
tables and related analysis,summarizing the findings of the
survey. The findings are organizedunder five main categories:
1. General Information2. Current Housing and
Infrastructure Status3. Housing and Infrastructure
Loan Details4. Unmet Housing and
Infrastructure Needs5. The Effect of Housing and
Infrastructure Loans on theProductivity of Home-based
Workers
Action Research: Phase I
1The ongoing Ahmedabad Parivartan Program brings basic infrastructure services to the slums of Ahmedabad for on-siteupgradation, in an affordable and sustainable way. The delivery and cost sharing mechanism is through a unique public-private-community partnership. For more details, refer to the publication entitled Ahmedabad Parivartan, UNDP-WorldBank and Sanitation Program – South Asia,1999.
6
Findings of the Survey
Main Occupation No. of Respondents % of Respondents
Distribution of Respondents by Number of PersonsLiving in Household
I. General Information
2Vendors include door-to-door saleswomen as wellas stationary vendors(based in marketplace) ofvegetables, fruits, fish, etc.3Includes bidi rollers,agarbatti makers, craftsworkers, papadrollers, etc.4Includes maidservants,ragpickers, constructionworkers and otherdaily wagers.520 percent of respondentsincluded non-clients ofSEWA Bank. All thehousewives interviewedbelonged to this samplesub-section.
7
Analysis: GeneralInformation
One-third of the womensurveyed are home-based workers
for whom their home is also theirworkplace and warehouse.
Particularly for these women,access to infrastructure, including
water and electricity is veryimportant as they are often
primary factors of production.Vendors are another common
category, comprising 27 percent ofthe women interviewed. These
women vend a variety of productsincluding fruits, vegetables,
cooked food products, etc. They
are either door-to-door vendorswithin designated areas, or
stationary vendors based in aparticular marketplace.
Providers of labor and services,including domestic servants, daily
wagers and construction workers,make up the third category of
occupation amongst the womeninterviewed (20 percent).
Ninety-two percent of thewomen interviewed were engaged
in income generation activities inthe informal sector. Eight percent
were housewives. None of those inthe housewife category were clients
of SEWA Bank.The majority of the women
(84 percent) earn Rs 1,500 per
month or less. In 88 percent ofcases, the total household income
is between Rs 1,500-3,500 permonth. This suggests that most of
the women interviewed aresubstantial contributors to their
total family income, generatingbetween 45-100 percent of the
monthly family earnings throughtheir individual efforts.
The average household size isfive to six persons (33 percent of
the families). In relation to theirtotal monthly household income,
nearly 100 percent of therespondents are living below the
poverty line6.
6According to the Planning Commission of India, the all-India urban poverty line for 1996-97 is defined as those with amonthly per capita income of Rs 353.44 or less. This figure is calculated on the basis of daily calorific requirements alongwith an added percentage for ‘other needs’ and updated annually in line with inflation. The latest update was undertakenin 1996-97.
Distribution of Respondents by Typeof Current House Construction
Details No. of % ofRespondents Respondents
Ownership with clear title 37 25Informal ownership14 74 49Rented house 39 26Total 150 100
House Ownership Details
No. of Rooms No. of % ofRespondents Respondents
1 112 742 25 173 10 7>4 3 2Total 150 100
Distribution of Respondents byNumber of Rooms in CurrentShelter15
Type of Space No. of % ofRespondents Respondents
Separate kitchen 54 36Open space 8 5Workshed 6 4Storage room 5 3Not applicable 87 58
Number of Respondents whoseHouses have Special Purpose Spaces(includes covered and uncovered spaces)
Type of Infrastructure No. of % ofRespondents Respondents
Own bathroom 62 41Own toilet 83 55Own water connection 107 71Own sewer connection 122 81Internal electricity in home 126 84
Distribution of Respondents byExisting Infrastructure Facilities inCurrent Shelter
7Society: Regular colony containing full, individual infrastructure facilities.8Chawl: Slum containing kuchcha or semi-pucca houses, with limited individual and some collective infrastructurefacilities.9Chhapura: Slum containing only kuchcha houses with very basic, collective infrastructure facilities.10Others include staff quarters, mohalla etc.11Kuchcha: Mud walls and floor with thatch/tiled roof.12Semi-pucca: Mud and brick walls and floor, with asbestos/tiled roof.13Pucca: Bricks and concrete; sometimes with asbestos roof.14Informal ownership refers to settlers squatting on government owned land for 10 to 15 years (or beyond); they do notpossess any legal land ownership documents.15Covered toilet and covered kitchen are each considered to be separate rooms.
9
ownership documents, althoughthey had been living in the same
house for 10 to 15 years (andbeyond). Most of the land was
either government or privatelyowned open spaces, on which
migrant workers had built theirhomes.
Twenty-six percent of thewomen surveyed lived in rented
accommodations, although allwished to have a home of their
own in the future.Lack of space is a very real
problem, as is evident from thefact that besides a basic room,
58 percent of the respondents donot have any other ‘special
purpose’ spaces, such as a kitchen,shed or any open space to work in.
Forty-one percent had their ownbathroom, while 55 percent
reported that they had access totheir own toilet. Those that had
their own sewer connection to thecity mains (majority of slums have
these), have built pour-flush model(water-borne system) toilets. Of
Analysis – CurrentHousing Status
The base-line survey found
75 percent of the respondentscurrently living in kuchcha or semi-
pucca one-roomed houses,located in slums. A total of
34 percent of the women surveyedhave a separate kitchen. Only
9 percent of the respondentsreported that they lived in a
‘formal’ society or a colony. It isinteresting to observe that all of
these women were residents ofSanjay Nagar or Sinheshwari
Nagar, where the ParivartanProgram has been completed.
With the provision ofcomprehensive infrastructural
facilities, residents now feel thatthey are no longer living in a slum,
but in a regularized ‘society’.Only 27 percent of residents
have pucca, two- to three-roomedhouses.
Half the families surveyed didnot possess any clear land
those residents that are notconnected to the main city
sewerage network but have builttheir own toilets, the majority have
built twin-pit pour-flush latrines.In terms of infrastructure,
approximately 71 percent havetheir own water connection.
However, they only have access totwo hours of water flow per day, as
it is released from the Corporationat designated times. Although
81 percent have sewerconnections to their home, only
55 percent have built their owntoilets. Lack of space, money,
adequate water for operating atoilet or technical know-how is
responsible for the fact that allthose with sewer connections have
not been able to construct theirown toilets as yet. A significant
proportion of respondents(84 percent) have electricity
connected to their house, althoughthe majority of these connections
are illegal due to lack of landtenure.
10
Findings of the Survey
III. Housing and Infrastructure Loan Details
Aware of Housing and No. of % ofInfrastructure Loans Respondents Respondents
Yes 131 87No 19 13Total 150 100
Distribution of Respondents Awareof SEWA Bank’s Housing andInfrastructure Loans
Source No. of % ofRespondents Respondents
Employees of SEWA Union 36 24Employees of SEWA Bank 42 28SEWA Bank Board of Directors 30 20Members of SEWA Union 23 15Not aware of SEWA Bank loans 19 13Total 150 100
Source of Awareness about Housingand Infrastructure Loans Availablefrom SEWA Bank
Total Number No. of % ofof Loans Respondents Respondents
Distribution of Respondents byTotal Number of Loans taken fromSEWA Bank Purpose of No. of % of
Loan Respondents RespondentsHousing or infrastructure 60 40Working capital for ownbusiness 38 25To buy equipment for ownbusiness 13 9Consumption loan 8 5No loan 31 21Total 150 100
Distribution of First Loans fromSEWA Bank by Purpose
Increased Earnings after No. of % ofTaking First Loan Respondents Respondents
Yes 50 33No 69 46No loan 31 21Total 150 100
Effect of First Loanson Increased Earnings16
Loan Amount No. of No. of Loans(Rs) Respondents Sanctioned
Less than 5,000 40 715,001-10,000 31 3310,001-15,000 6 415,001-20,000 7 120,001-25,000 23 10More than 25,001 12 0No loan 31 0Total 150 119
Comparison of First Loans by AmountRequested and Amount Sanctioned
16 It was difficult to obtain accurateanswers, as many respondents foundit hard to remember and quantifywhether the first loan they had takenfrom SEWA Bank, had led toincreased earnings for them.17Only 30 of 150 respondents soughtadditional funds to supplement theirfirst loan from SEWA Bank; 100percent of them had taken loansfor house/infrastructureupgradation/repair.
Sources of No. of Monthly Rate ofAdditional Funds Respondents Interest Paid (%)
Sources of Additional Funds to Supplement FirstLoan and Rate of Interest Paid17