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TurningCold
Money
Hot
WhatTheSHGMovementCanLearnFromAnAlternateApproach
KimWilson,VisitingFellow
August2013
I IntroductionIndiasfinancialecosystemisevolvingatarapidpace,yetcommercialandevenpublicactorscontinueto
bypassrural
households
in
search
of
more
profitable
and
more
easily
reached
markets.
Picking
up
the
slackareNGOs,underevertighteninglegalconstraints,andmassivegovernmentledprograms.The
schemesoftheNationalBankofAgricultureandRuralDevelopment(NABARD)andNationalRural
LivelihoodsMission(NRLM)arefarreachingandcarrywiththemamandatetodevelopruralfinancial
marketsaswellastosupportpeoplelivingandworkinginthesemarkets.Withinthesebroaderforces,
theAgaKhanFoundationanditspartnersi inIndiahaveenjoyedsuccesswithamethodcalled
CommunityBasedSavingsGroups(CBSGs),whichassistsruralandperiurbanwomenandmenin
puttingtheirfinancialresourcestowork.
TheaimofthispaperistopersuadepractitionersfamiliarwiththeSHGmodeltoassesstheadvantages
oftheCBSGapproachandtoadoptfeaturesrelevanttotheircontexts.
1. WhatisanSHG?
Initiatedinthe1980sbyseveralNGOs,theSHGmovementevolvedtoincludebanksandgovernment
stakeholders.ManystatesinIndiapromotetheformationofSHGsforavarietyoffinancialandsocial
purposes.SHGsareoftenencouragedtolinktoabankforcreditthatsupplementsthegroupcorpus.
WhilethereisnosingleSHGmodel,thereisasetofcommonlyusedpracticesthatareunderstoodto
expresscoreSHGprinciples.AnSHGconsistsof1020womenwhoselfselectintoafinancialgroup.The
groupsetstheamountandfrequencyofsavings.Italsodecideswhointhegroupmightreceivealoan,
forwhichpurposestheloansaretobeusedandtherateofinterestborrowersmuchpay.
Technically,most
SHGs
are
aform
of
ASCA
accumulating
credit
and
savings
association
with
no
set
dateonwhichthegroupcorpus(savings,interestincomeandfees)isreturnedtoitsmembers.
2. WhatisaCBSG?
ACommunitybasedSavingsGroup(CBSG)isanapproachpromotedbytheAgaKhanFoundationandits
partners.InspiredbytheVSLAmodelrefinedbyCAREinAfrica,byindigenousASCAsoperating
throughoutIndia,andbyPradansearlyeffortsineasternIndia,theCBSGmodelfollowsaspecific
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systemoffinancialintermediationii.Duringanintensive5daytraining,facilitatorsmasterasetof
principlesandproceduresinsavingsgroupformationandstrengthening.Withinlessthanayearoftheir
firstmeeting,CBSGswillhavegraduated,meaningtheycanmanagetheirfinancialactivities
independentofafacilitator.ThefacilitatorispaidbytheCBSG.
UndertheCBSGmodel,thefacilitatorbringstogether1520women,withgroupsizevaryingbylocale.
Membersmeetregularly,usuallytwicepermonth,topurchasesharesinagroupfund.Afterjustafew
weeksofmeeting,membersmayrequesttoborrowmoneyfromthefundforanypurposetheychoose.
Attheendoftheyearwhenallloanshavebeenrepaidwithinterest,thegroupsharesoutitscorpusiii,
distributingsharecapitalandproportionateincomebacktomembers.
Technically,CBSGsaretimeboundASCAs accumulatingcreditandsavingsassociationsthathaveset
dateinwhichthegroupcorpus(sharescapitalplusincome)isreturnedtoitsmembership.
3. Whatarekeysimilaritiesanddifferences?
TheCommunityBasedSavingsGroupapproachsharessomefeatureswiththeSHGapproach.Groupsof
1020orevenmorewomengatherforthepurposesofpoolingandmanagingtheirfinancialresources.
Membersmeetregularlyandareabletorequestloansfromthegroupcorpus.
But,thesimilaritiesendthere(seeBox1:FeaturesofSHGsandCBSGs).Laterinthispaperweexplore
crucialdifferencesandtheirimplicationsforfinancialinclusion.
Box1:FeaturesofSHGsandCBSGs
Feature SHG CBSG
Lengthoftimefromearlygroup
formation
until
complete
autonomy.
Threeormoreyears. Lessthanoneyear.
Thewayinwhichthegrouptakes
custodyofmembercontributions
Asregularsavingsdeposits,
usuallythesameamountper
personpermeeting.
Asregularsharepurchases
andcanvarybymemberand
bymeeting.
Socialfund
Distributionofcorpusbackto
members
Raredistributions;corpuscan
stayintactfordecades
Periodic(usuallyannual),
planneddistributionofcorpus
tomembersinproportionto
shares.
Recordkeeping Severalsetsofsavings,loan,
andledgersandpassbooks
Passbooks.Groupshave
optiontokeepasimple
ledger.
Creditfrombanksandoutside
sources
Highlypromoted Notpromoted,savingsare
promotedandoftenCBSGs
haveexcessliquiditytolendto
members.
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Metastructures(federations,
clusters,etc.)
Extant,oftenpartof
governmentSHGpromoted
programs
None
Governmentbenefits
through
groupsMany
SHGs
formed
for
the
purposeofchanneling
governmentbenefitsto
members.
CBSGmembers
may
choose
to
joinotherSHGgroups,but
CBSGsdonotchannel
governmentbenefitsto
members.
II ChallengesoftheSHGModelChallengesembeddedintothenormsoftheSHGapproachunintentionallyexcludesomeofthevery
peoplethat
the
SHG
movement
hopes
to
serve.
We
examine
afew
of
the
more
critical
challenges
below.
1. ServicesdonotmatchthecashflowofmembersorthecapacityoftheSHG.
TheincomeofmanypoorSHGmembersdependsonwagelabororfarmingactivity.FewlivinginIndias
hardpressedruralareasenjoysteadyemploymentwithmuchofhouseholdearningsbeingseasonal,
basedonfarmingcyclesandwagelaborpatterns.Becauseincomeisplentifulatcertaintimesofthe
yearandscarceatothers,thecapacityofmemberstomakeregularsavingsorloanpaymentsislimited.
(Sinhaetal2008).
Exaggeratingtheimpactofirregularincomeistheoccurrenceofhouseholdemergencies.Aboutof
malariaor
aflare
up
of
joint
pain
can
bring
on
sudden
costs.
Irregular
income
and
erratic
expenses
createcashflowvolatility,reducingamembersabilitytomakesteady,samesizepaymentstoher
group.Memberswhoarechronicallyillorwhohavechronicallyilldependentsinparticularunderstand
theirtendencytobouncefromsmallemergencytosmallemergency. Theyknowexpenseswill
emerge.Theyjustdontknowexactlywhen.
Samesizesavingspaymentsdonotworkforthesekindsofmembers.Infact,samesizepayments
ensurethatthegroupcorpusshrinkstothepaymentcapacityofitspoorestormostcashvolatile
members.Shouldamemberbecertainthatshecouldcommit5rupeespermonth thoughinsome
monthsshemightdeposit25rupees sheclaim,inanefforttoreducetheriskofovercommitting,that
hermaximummonthlysavingscapacityis5rupees.
Thesamesizedepositnotonlyrobsmembersofthechancetosetasidemoresavingswhentheyhavea
littleextramoneyinthehousehold,itdeprivesanSHGofthechancetoincreaseitscorpusandearn
moreinterestincomeforitsmembers.TheSHGhastwooptionswhenfacingthisdilemmaofsamesize
payments: excludememberswhoarepoororcashvolatileorincludethemandminimizethebenefits
tothegroupatlarge.
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Thoughthereasonswhygroupsgenerallyrequirememberstokeepsimilarsavingsbalancesare
unknown,ourfieldresearchindicatesthatmaintainingconsistent,samesizepaymentsmakeforeasier
recordkeeping.Designingaproductorprocessaroundeaseofrecordkeepingseemsaclumsy,supplier
orientedwayofofferingpeoplethetoolstheyneedtomanagetheirfinanciallives.
2. SHGsoftenrequirenewmemberstomatchexistingmembersavings.
SHGsoperateunderadefactorulethatrequiresprospectivememberswhowanttojoinanexisting
grouptocontributealumpsumequaltotheindividualsavingsofeachmember.Forexample,ifthe
averageindividualsavingsofamemberis2000rupees(about$40),thenanewmemberwouldneedto
comeupwith2,000rupeesforherinitialcontribution,eventhoughittookothermembersmonthsor
yearstoaccumulate2,000rupees.WhythisnormexistsacrossIndiaisnotknown.Likelyithastodo
withtheinabilityofSHGstomanagevaryingamountsofdeposits,eitherbecauseofacomplicated
systemofrecordkeepingorbecauseofthewayinwhichmembersweretrained.
Whatever
the
cause
of
this
norm,
the
condition
that
a
new
member
must
muster
an
entry
sum
ensuresthatonlybetteroffpeoplejoinanexistinggroup. Shouldagrouplendstheentrysumtoa
newmember,thatnewmembermustimmediatelytakeondebt.Thisnormsguaranteesthatonly
potentialmemberswithgreaterfinancialmeanscanjoin.(Sinhaetal2008).
Italsodiscouragesyoung,marriedwomen,newtoavillageandwithoutmuchcapital,fromjoininga
group.WhenpressedSHGssaidtheyaddressedtheissueoflockingoutnewmembersbysuggesting
thatvillagenewcomersformtheirownSHGs.Naturally,thesenewmemberswouldnotbedrawing
fellowmembersfromalargerpoolofwomen,butpurelyfromarosteroftheareasmostrecent
arrivals.Enteringintoanexistinggroupisindeeddifficultforprospectivemembers. Onestudys
sampleof1942SHGs(Reddy&Reddy)indicatedthatonlytenhadadmittednewmembers.
3.
SHGslack
important
rest
periods
and
defined
share
out
dates.
TypicallySHGsaccumulatesavingsovermanyyearswithnobreaksinbetween. Itisnotdifficultto
imaginewhyfacilitatorsofSHGwouldpreferlonglifespansoftheirgroups.(Rutherford2009)They
spendagreatdealoftimesettingSHGsupandwouldprefernottodismantlethem.Permanentgroups
offerapermanentplatformsontowhichfacilitatorscanfixavarietyofotherservices.
Yetsuchaformulaofborrowingyearinandyearoutwithnodividendsdistributedtomembers,no
cleancompletionofafinancialcycle,noannualrestperiodsforfestivals,harvests,orpreparingfamilies
fortheinevitablerainsandfloodsignoresseasonalrhythmsandpreventsthechanceforgroupsto
periodicallyreconstitutetheirmembershipandcontinuesaving. Theresultisthatprospective
membersmay
be
excluded
from
participating
in
any
SHG
at
all.
There
is
no
logical
moment
of
entry
for
themiftheychoosetocomemidstream. WithoutautomaticrestperiodsSHGsmayunintentionally
excludesocialgroupsthatwouldenjoythebenefitoffinancialservices. Followingareafewexamples.
ExclusionofMigrants.InIndia,aprincipalincomecopingstrategyofruralhouseholdsisshorttermor
circularmigration.Itislargelyaninvisiblephenomenon,withlimiteddata.ArecentreportbyUNICEF
indicatesthatstudiesstruggletopinpointthenumberofadultsandyouthmigrating.Estimatesvary,
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suggestingthatanywherebetween15millionand100millionpeoplemigrateeachyear,mainlyin
searchofwork.Whatevertheexactnumbermaybe,UNICEFclaimsthatmostseasonalmigrantsbelong
toeconomicallydeprivedgroups(UNICEF2012).
Migrationmakes
an
SHG
members
presence
at
year
round
meetings
impossible.
Without
an
annual
breakinmeetingsorareturnofsharecapital,SHGsdonottakeintoaccounttherealityofpeopleonthe
move.Migrantswithseasonalworkpatternswouldneedtostopattendingmeetingsandmightliketo
uselumpsumsfromashareouttohelpsupporttheirtravel.Akeyreasonsmembersdroppedoutof
SHGsaccordingtoa2005studywasmigration.(Sinhaatal2008)
.
ExclusionofYoungWomen.Wehavealreadydiscussedhowanentrysumrequirementpreventsyoung
womenfromjoiningexistinggroupsintheirhusbandsvillages.Butthenormsgofurtherbydiscouraging
unmarriedwomenfromjoininggroupsintheirnatalvillages.TheSHGsdonotwanttobereturning
savingsthatamembermightwithdrawassherelocatestoherhusbandsvillage.Likelysuchan
accommodationwouldrequirealevelofaccountingbeyondthecapacityoftheSHG.
Unmarriedwomenmightappreciatethechancetoaccumulatesavingsfortheirweddingsortosetupa
newhome.Moreimportantly,theymightliketousetheirshareouttoprovidesomeindependence
fromafuturemotherinlaw,ortocollecttheentrysumneededtojoinanexistinggroupinher
husbandsvillage.
ExclusionofLateAdopters.ThefinancialpermanenceofSHGsmeansthereisnofixeddatewhen
groupscandissolve.Themostfinanciallydisadvantagedpeoplelivinginanareamightwanttowaitto
seehowanSHGfunctionsbeforejoining.Bytheydecidetojoin,itisoftentoolate.Theycannotcome
upwithanentrysumneededandthegrouplacksaclearpointwherenewmembersmightjoin.
Grouppermanencyproducesaadoublelockouteffect:membersarelockedouttheirsavingsand
newmembers
are
locked
out
of
existing
SHGs.
There
is
also
alock
in
factor
at
work.
Members
of
groupsfinditdifficulttoleavepermanentgroups.Groupshavedifficultycalculatingsavingsorensuring
thereisenoughliquidityintheircorpustofundafullwithdrawal. Ifelitemembers(Tankha2012)have
takenoverkeyfunctionsofanSHG,thenthelesselitemayfindthemselvesinastateofpermanent
capture,meetingendlessexpectationstoproduceregularsavingswithouttheclearbenefitofbeingable
toaccessthosesavings.
4. Complicatedrecordslimitsavingsaccessandcreatedependency.
Aswehaveseen,contributingtobothlockoutandlockinisthetimeunboundednatureofSHGs.
Alsocontributingarecomplicatedbookkeepingsystems,whichthoughnotrequiredofSHGs,seemtobe
thenorm
of
SHG
operations.
Regular
deposits
are
noted
in
ledgers
and
passbooks.
Loans
taken
and
paymentsmadeareregisteredinasimilarmanner.Thesesystemsmaketheprospectofreturning
savingstoamembercomplicated.
Aoneroussystemofpassbooksandledgersguaranteesthatgroupswithlargelyilliteratememberswill
notbeabletoselfmanagetheirfinancialactivities.Instead,theymustrelyontheassistanceofexternal
recordkeeperstoperformtheevenmostbasicfunctions.
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SHGsacrosstheboardsufferfromincomprehensibleandinaccuratebookkeeping.Besidesthewasteof
timeofkeepingmultiplebooks,therecordsareofteninaccurate,subjecttooverwritinganddouble
entry,additionandsubtractionmistakesaswellasomissionofimportantinformationlikeloan
repayments.
Inasimple
audit,
one
study
found
that
40%
of
groups
had
weak
records.
Many
had
not
beenupdatedforayearormore(Sinhaetal2008)
5. Externalcreditcanbeconfusinganddamaging.
NationalandgovernmentschemesinIndiaofferSHGscredittosupplementtheloansfromthegroup
corpus.Intendedtohelpentrepreneursprocurefixedassetsorfundworkingcapital,evidencedoesnot
bearouttheseusesofcredit.
InMicrofinanceSelfHelpGroupsinIndia,AjayTankhawritesthatSHGs,dependentoncredit,suffer
fromalimitedcapacitytoabsorbnewroundsofcredit,particularlyafterthethirdorforthround,yet
theystill
seek
more
credit.
With
their
capacity
to
handle
larger
loans,
SHGs
may
experience
aphenomenonsimilartothatofthePeterPrinciplewhereinSHGsrisetotheleveloftheirown
incompetence,i.e.borrowandreturnloansfrombanksuntiltheyareunableorunwillingtodoso.
(Tankha2012)
Creditlinkagesareunderpressure.Arecentstudy(Tankha2012)showsthatinalargenationalscheme
thenumberofSHGloansfrombankshasdeclinedoverthepastthreeyears.ThenumberofSHGslinked
tobankshasalsodeclined.Inpart,bankersthemselvesfindtheadministrativeburdensnotworththe
income.Moreperilousisthatbanksextendingcredit,mayactuallybecompetingwiththeinternalfunds
ofSHGs.Further,toqualifyforcredit,somebanksdemandgroupdeposits.TheSHGscannotaccess
thesedeposits,whichcouldotherwisebeusedtofundthecreditneedsofgroupmembers.
Infact,SHGmembershavebecomedissatisfiedwithrelativelysmallaverageloanamounts(Srinivasan2010).Loansizesarelikelytostaysmallifsaverscannotgarnergoodreturns.BecauseSHGfacilitators
discouragereturnsinfavorofaccessingbankcredit,thereislittleincentiveforsaverstosavemorethan
theminimum.
Whilelinkstosourcesofcreditcanbeusefultomaturegroups,itcanbedamagingtonewgroups.SHG
facilitatorsareoftentaskedwithhelpingbankstocollectloans,anactivitythatblurstheirroleasan
enablerofselfhelp.Worse,membersshakedownfellowmemberstocollectloansinorderthatthe
groupmightqualifyforafreshroundofexternalcredit(Sinhaetal2008).Andfinallylargerloansare
oftenreservedformoreelitemembers.
6.
Complicatedservice
structures
create
new
burdens.
Stategovernmentspromotemorethan75%ofSHGsinIndia(Tankha2012).Wheregovernmentstaff
wasonceresponsibleforbuildingbasicinfrastructureordeliveringbasicservices,SHGshavebecome
responsiblefortheseactivities.Livelihoodsimprovement,forestrymanagement,watermonitoringnow
fallintheprovinceofSHGs.ManyschemeslayerontoSHGscomplicatedsuperstructuresthatrequire
groupstofederateandclusteratdifferentlevels(seeBox2).Variousfinancialandmanagement
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mechanismsdeployedbytheprogrammeensurethatSHGsremainlargelycreditdrivenanddependent
onoutsidesupport(Ledgerwood2013). Ambitiouscoverageandsaturationgoalsoftheschemecause
onetowonderhowavillagermightoptoutwithoutlossofdignityormarginalization.
Box2:
Jeevika
National
Rural
Livelihoods
Mission
in
Bihar:
An
Example
of
New
SHG
Burdens
WithsupportfromtheWorldBank,Jeevikaseekseconomicandsocialempowermentoftheruralpoor
inoneofIndiaspooreststates,interveningwithcommunitiesthroughfourcomponents:institutional
capacitybuilding;socialdevelopment;microfinance;andlivelihoodspromotionandstrengthening.
(Tankha2012)
Jeevikaisambitious.Atitsendin2022,theprojectaimstoreach100%ofpeoplewhoarepoortothe
nakedeyeiv.Theprojectplanstoreachfivemillionfamiliesin44blocksofBihar,roughly4,000villages.
AccordingtoJeevikawebsite,Thecorestrategyoftheprogrammeistobuildvibrantcommunity
institutionsofwomen,whichthroughmembersaving,internallending,regularrepaymentand
economicactivitiesbecomeselfmanagedinstitutions.Selfhelpgroupsaretheprimarylevelcommunity
organization.From
this
base
structure,
Jeevika
has
elaborated
acomplex
management
and
credit
structurethatinvolvesVillageOrganizations,BlockLevelFederations,CommunityInvestmentFundsas
wellasbanklinkages.Eachrequiresdifferentrecordkeepingandadministration,withsomeoverseenby
staffandothersdevolvedtothevillagelevel.
III TheCBSGModelandChallengesAddressed
TheCBSGmodeladdressesmanykeychallengesofSHGs.Withoutastudytodeterminethedifferencein
householdimpactsbetweenCBSGsandSHGs,oracompleteunderstandingofcostsstructures,itis
difficulttoquantifybangforthebuck(unitofimpactperunitofcost)andcompare. But,atthisearly
stageit
appears
that
CBSGs
have
the
capacity
to
foster
financial
flexibility
and
social
inclusion
to
a
greaterdegreethanthatofferedbySHGs.
1. Theclarityoftheshareandpassbooksystemeliminatescomplicatedbookkeeping.
TheCBSGapproachusessimpleprocedurestoguideeveryCBSGmeeting(AllenandStaehle2008).
Meetingregularlytoissuemembersharesandtomakeloanseveryotherweek,theCBSGreturnsall
accumulatedfundsincludingincome(interestfeesandfines)tomembersaccordingtotheirshares.
BecauseCBSGsrequireonlypassbooksaswrittenrecordssomegroupsoptforsimpleledgers
participatinghouseholdsquicklyunderstandsaving,loan,andsharepurchaserules.Membersfindthe
sharesystemeasytounderstand,andarequicklyabletosetshareprices.Forexample,thevalueofone
sharemaybesettoanamountthatreflectswhatthepoorestormostcashvolatilemembercanafford
topurchase,say5rupees.
Duringeachmeeting,groupmembersknowexactlyhowmanyshareseachhaspurchasedandthusthe
worthofeach.Shouldamemberneedtoleavethegroup,hercapitalandreturnscanbecalculated
easilyfromherpassbook.
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2. Theflexibilityofthesharesystemmatchescashflowofmembers.
Membersmaypurchaseasfewasoneshareandasmanyasfive(somegroupssetthesharemaximum
ratehigher)andmayvarytheirpurchasefrommeetingtomeeting.Ifmemberincomeistypicallylowin
theseason
before
the
harvest,
members
purchase
fewer
shares.
After
the
harvest,
members
purchase
more.Eachmembercandecideateachmeetingwhathercapacityisandmakesharepurchases
accordingly.
Suchflexibilitytakesintoaccounttherealitiesofcashvolatilememberswhomaynotbeabletocommit
tosamesizesavingsthroughouttheyear,ortosavingsthatequalsthatofothermembers. It
addressesthechallengeofSHGsmentionedearlier:inanSHG,membersmisstheopportunitytoset
asidemoresavingsthanthedefinedsavingsrate.InaCBSGmemberscaneasilyconvertoccasional
householdsurplusesintoprofitableinvestments.
3.
The
periodic
share
out
eases
important
shuffling
and
reshuffling
of
membership.
Eachyear,theCBSGcallsinitloansfrommembers,makessureallinterest,feesandfinesarebrought
current.Itdistributescapitalincludingearningsbacktomembersaccordingtotheshareseachhas
purchasedduringtheyear.Membersmayimmediatelyinvesttheirshareoutsinanewcycleof
investmentandborrowing.However,manyclaimtheylikethelumpsumanduseittomakehome
improvements,topurchaseclothing,ortopayforanimportantmedicalprocedure,hirelabourtohelp
duringtheplantingseasonorpayschoolfees.
Besidesofferinganattractivelumpsumtoeachmember,thisregularclearingoftheCBSGfundallows
otherbenefitstooccur.First,unmarriedwomenmightjoinagroupforayearortwo.WhileanSHG
mightresistadmittinganunmarriedwomanduetothetroubleofcalculatingherdepositvalue,aCBSG
hasend
of
year
and
even
during
the
year
systems
in
place
to
allow
an
unmarried
woman
to
leave
the
group.WesawevidenceofthisnearPatna.
Second,aregularclearingofaccountsallowsnewmemberseasyentryintoanexistingCBSG.Theydo
notneedtomusteralargeentrysumtogainaccess.Theysimplyjointhegroupatthebeginningofa
freshcycle.Sucheaseofentryallowsmarriedwomennewtothevillagetojoinandmakesroomforlate
adopters.Italsomakesroomfordisgruntledorevenmarginalizedmemberstograciouslyexitthegroup
withtheirdignityandlocalrelationshipsintact.
CBSGswoulddowelltopayattentiontovariationsinTanzaniaontheshareoutmodelwheregroups
choosetoshareoutafterseveralyears,annuallydistributedividendsbasedonprofits,butallow
memberseasy
withdrawal
of
their
full
savings
ifmembers
give
amonths
notice.
New
mobile
technologyinEastAfricahasthepotentialtomakeeasycalculationofindividualmemberinterest
amounts
4. Nonautomaticcreditlinkagesallowmemberstomaximizehotmoney.
TheCBSGapproachacknowledgesthatnotallmoneyisthesame.Membersdividetheirthinkingabout
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whethermoneyishotorhardwonfromthriftorcoldandeasilywonfrominstitutionalsources
(Wilsonetall2010).Baksamoney,orboxmoney,isdearertomembersandmorelikelytobe
safeguardedthanexternalcredit.
Hotmoney
affords
members
two
important
advantages:
loans
from
the
corpus
are
more
flexible
than
externalloansandassuchcanmoreeasilyassignloanstopriorityuses. Plus,theycanretainthe
profitsandenjoytheprofitslaterasreturnoncapital.(Premchandar2009)
FacilitatorsoftheCBSGapproachunderstandthatmembersmayusefundsforlivelihoodactivitiessuch
asthepurchaseofafewchickensoragoat,butjustasoftenwillusefundstopurchasefoodorclothing,
ortopayschooltuition.Askingmembersofgroupstotakeontheburdenofdebtwhentheyhaveno
growingenterprisetosupportthatdebt,candamagethefinancialstatusofmemberhouseholds.
5. Thelackofametastructurepreventsburdensomeadministrativeactivities.
CBSGsarenotfinanciallyfederated,norclustered.Suchstructuresdetereasygroupformationand
dissolution.Theyaddlevelsofadministrationandbookkeepingthatmaybecostlyandwouldrender
manyactivitiesopaque,excepttothemostliteratemembers.
FacilitatorsofCBSGsdonotencouragememberstotakeontheburdenofmanaginggovernment
services.SHGs,oftenformedbygovernmentsandNGOs,dotakeontheseservices,thusshiftingapublic
sectorworkloadtotheSHGandbyextensiontoitsmembers.
TheAgaKhanFoundationanditspartnersrecognizethatsomewomenmightwanttheservices
providedbyvariousgovernmentschemeschanneledthroughSHGs.IfCBSGsseeaserviceopportunity,
theymayseizeitattheirdiscretion.CBSGmembersarewelcometojoinSHGstoreceiveadditional
services,but
are
not
required
to
do
so.
Our
research
shows
that
some
members
choose
to
be
in
multiple
groups,withtheCBSGservingacrucialnicheintransparent,efficient,andusefulfinancialservices,
particularlysavings.
6. Aseparatesocialfundhelpswithhouseholdemergencies.
TheCBSGapproachinstructsgroupstoconsiderthecreationofseparatesocialfund,akindofinsurance
formembers(Ledgerwood2013).Keptinsidethesamelockboxasthegroupinvestmentandloanfund,
thesocialfundtypicallygoestomembersinneedofsmallgrantstoaddresshouseholdemergencies.
CBSGsfundtheirsocialfundswithregular,separatecollections,withspecialcollectionsorsimplyby
channelinginterestincomeintoit.
Becausemoneyfromthesocialfundisusuallygiventomembersasagrant,thegroupcanskip
cumbersomerecordsonsocialfundactivities.Itcansimplycountitscashbalance.Suchafundallows
groupstohelpneedymemberswhomaynotbeabletorepayaloan,whilemaintainingaseparate,
healthycorpus.
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IV PromisingOpportunitiesforTheCBSGApproach1. NABARDsSHG2PoliciesandProductsareCBSGFriendly
Incorporatinglessons
its
first
phase
of
SHG
promotion
(here
called
SHG1),
NABARD
has
re
engineered
its
approachtoincorporatebothmoreflexiblefinancialoptionsforgroupsandindividualmembers.
First,NABARDhasremoveditsrequirementinSHG1whereanSHGhadtoguaranteeallbanklinked
loans,evenifjustafewmembersofthegroupborrowed.UnderSHG2,theentiregroupneednot
guaranteeabankloan.Smallersubgroups,orJLGs(jointliabilitygroups)mightborrow,withtheir
membersguaranteeingloansofJLG.ThoseinthelargerSHGorCBSGneednotbeatriskfortheloansof
theJLG.
Second,NABARDispioneeringtechnologyrelatedinitiativestoassistSHGswithrecordkeeping.Using
mobilehandsets,100SHGsinTamilNaduareabletorecordfinancialtransactionsintheirlocal
language.Mobile
phones
capture
financial
information
as
well
as
meeting
attendance
and
via
SMS,
everymemberreceivesaweeklyreport.Similarly,anotherpilotinWestBengalisusingaPOSdeviceto
capturemembersavings,borrowingandbankbalances. Thedeviceisalsoabletoinstantlyprinta
physicalrecordandcangeneratememberlevelandgrouplevelreports. (NABARD)
Iftechnologyviamobiledevicescouldenabletheprecisetrackingofindividualtransactions,thenaCBSG
wouldknowtheworthofitsgroupandeachofitsmembersatanygiventime.MorematureCBSGs
couldcashoutaportionoftheircorpuswhilebringingabalanceintothenextcycle.Thiswouldallow
thegrouptoprovideendofcycleorlongertermloans,whichmightbeusefulforlivestockfatteningand
reclaimingmortgagedland.
2.Aadhaar
Can
Offer
Individuals
in
CBSGs
Additional
Services
AadhaarisaninitiativeoftheGovernmentofIndiatopromotefinancialinclusioninallstates.Issuedby
theUniqueIdentificationAuthority,itisa12digitindividualidentificationnumberthatallows
individualstoeasilytransactwithbanksandbankingcorrespondents,todeposit,transferorreceive
electronicpaymentsincludingcashassociatedwithgovernmentbenefits(UIPAI).
Aadhaarmightbeagoodcomplementtomembersingroupswhoenjoythedisciplineandprecisionof
theirCBSG,butwhowouldalsoliketobankprivatelyusingtheconvenienceoftheirmobilephoneor
welllocatedcorrespondents. Infact,theregulationpermitslocalintermediariessuchaswomens
savingsgroupstoprovideservicestotheircommunities.
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V Conclusion
TheCBSGapproachbuildsonthephilosophyofearlypioneersintheSHGmovement.Itcanafford
stakeholdersintheSHGmovementtodayachancetorealizetheoriginalpromiseofthismovement:full
socialand
financial
inclusion.
Used
well,
elements
of
the
CBSG
approach
can
strengthen
SHG
practices.
Tooptimizegrouporganizingactivities,thefacilitatorsofSHGscanincorporateintotheirworkthe
elementsdescribedinthispaper.Traininggroupstokeepsimplerecords,toreplacesavingswithflexible
sharepurchase,toconductannualshareouts,andtoincludeasocialfund,isnotdifficult.Anditcan
leadtomoreautonomousgroupsthatofferversatileservicestotheirmemberships.Ininstanceswhere
convertingSHGstoCBSGsisdifficultforexampleincontextswhereexternalcreditormanagementhas
predeterminedtheoverallapproach SHGfacilitatorscanencourageSHGmemberstoform
additionalgroupsthatfollowtheCBSGapproach.Inthisway,memberscanchoosewhichgroupthey
belongtoandforwhichpurposes.
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References
Allen,Hugh,Staele,Mark(2008)VillageSavingsandLoanAssociations,APracticalGuide,Practical
ActionPublishing,
London
Ledgerwood,Joanna,Earne,Julie,NelsonCandace,eds.(2013)TheNewMicrofinanceHandbook,A
FinancialMarketSystemsPerspective,TheWorldBank,Washington,D.C.
NABARD(2012)StatusofmicroFinanceinIndia,20112012,NationalBankofAgricultureandRural
Development,Mumbai
Premchander,Smita,PrameelaV.Chidambaranathan,M,Jeyaseelan,L.(2009)MultipleMeaningsof
Money,HowWomenSeeMicrofinance,SAGEPublications,NewDelhi
Reddy,K.RajaandReddy,C.S.(2012)SelfHelpGroupsinIndia:AStudyonQualityandSustainability,
anENABLE
Publication,
Hyderabad,
India
Rutherford,StuartwithArora,Sukwinder(2009)ThePoorandTheirMoney,Microfinancefroma
TwentyfirstCenturyConsumerPerspective,PracticalActionPublishing,London
Sinha,Frances(2008)MicrofinanceSelfHelpGroupsinIndia,LivingUptoTheirPromise?Practical
ActionPublishing,London
Srinivasan,N.(2010)MicrofinanceinIndia,StateoftheSectorReport2010,ACCESSandSAGE
Publications,NewDelhi
Tankha,Ajay,
Banking
on
Self
Help
Groups,
Twenty
Years
On
(2012)
SAGE
Publications,
New
Delhi
UNICEF(2012)OverviewofInternalMigrationinIndia(reportaccessedMarch1,2013)
(UIPAI)UniqueIdentificationPlanningAuthorityofIndia,Aadhaar,availableonlineat
http://uidai.gov.in/aadhaar.html,accessedonMarch1,2012
Wilson,Kim,Harper,Malcolm,Griffith,Matthew,eds.FinancialPromiseforthePoor,HowGroupsBuild
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13
i PartnersoftheTheAgaKhanFoundationinIndiaworkingonCBSGsincludeAKRSP,NIDAN,NavJagriti
andSakhi
ii FormoreonthedetailsoftheVSLAmethod,thebasisonwhichCBSGmodeloperates,seeAllenand
Staehle;for
guides
on
similar
models
see
www.savings
revolution.org
iii TheCBSGapproachtypicallydoesnotusethetermcorpustodescribedpooledsharepurchaseand
deposits.ItisusedinthepapertodrawsimilaritiesanddifferenceswiththeSHGmodel.iv InterviewwithRavinderNathChoudhary,DistrictProjectManager,December2012.