Micro Finance

Assessing Impact of Microfinance Group Members

10/05/09

Sapna Cathrine Anthony Neha Sinha Mukesh Kumar Jha Satyendra MICROFINANCE Chandra Pandey

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Microfinance •

Microfinance is defined as the provision of saving, credit and other financial services and products of small amount to the poor for enabling them to raise their income level and improve living. • The institution that provides these services to the poor is called as Microfinance Institution. 10/05/09

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Why poor need credit • In Stuart Rutherford’s recent book The Poor and Their Money, he cites several types of needs Lifecycle Needs: such as weddings, funerals, childbirth, education, homebuilding, widowhood, old age. Emergencies: such as sickness, • Personal unemployment, theft, harassment or death.

injury,

• Disasters: such as fires, floods, cyclones and man-made events like war or bulldozing of dwellings. • Investment Opportunities: expanding a business, buying land or equipment, improving housing, securing a job (which often requires paying a large bribe), etc.

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Meaning of impact Assessment : Impact assessment is the process that seeks to determine if any intervention has had the desired outcome. Microfinance impact analysis is the process by which one determine the effects of microfinance as an intervention • Impact assessment is a critical element in further improving micro-finance services and promoting innovation. • To know the outreach of MFIs • Whether the services reached to the poor in sustainable manner i.e. improved their socioeconomic condition or not

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When should be impact be assessed • Impact Assessment before intervention

• Impact Assessment after intervention

• Impact Assessment During Intervention

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Users of Microfinance Impact Assessment • Microfinance Practitioners • Donors • Policymakers • Academics 10/05/09

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Kinds of Impact Economic impacts It can be at the level of economy itself. A large MFI reaching hundreds of thousands of clients may expect or aim at impact in terms of changes in economic growth in a region or sector. Sociopolitical or cultural impacts To know the shift in socioeconomic status of a particular sub sector. Personal or Psychological Impacts Microfinance can have impact on borrower’s sense of self.

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Impact of Microfinance on women • Increasing women’s income level • Control over income leading to greater levels of economic independence. • Enhancing perceptions of women’s contribution to household income and family welfare • Increasing women’s participation in household and decision making. • Access and control over assets. 10/05/09

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Impact of Microfinance • At the household level. • At the individual level. • At the enterprise level.

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Impact Proxies Willingness to pay

Client oriented impact analysis

•The magnitude of impact is hard to determine •Intra-household effects are not captured •Long-term development impact(poverty reduction) is unclear

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•The dilemma of the human subject as a “Dynamic target.”

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Methods of Impact Assessment • Qualitative Approaches.

• Quantitative Approaches.

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1. Qualitative Approaches  Intensivity: a continuous or regular presence among client over time.  Structured observation  Triangulation  Open-endedness.  Focus group. 10/05/09

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Qualitative Approaches  Social mapping and modeling.  Seasonality maps or calendars  Daily time – use analysis  Participatory linkage  Venn Diagrams  Wealth Ranking 10/05/09

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Quantitative Approaches  Experimental Methods.

 Quasi –Experimental methods.

 Non- Experimental methods. Doc. 10/05/09

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Choice of unit of analysis • The client as a client • The client as an individual • The enterprise • The house hold economic portfolio 10/05/09

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Case study of Bandhan “Hope for the poor”

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Bandhan • Bandhan is a microfinance Instituiton operating in West Bengal since 2001. The organisation is registered under the west Bengal Socities Registration Act, 1961. • It started its microfinance operations in july 2002 with technical support from Association for Social Advancement(ASA), Bangladesh. • Bandhan was set up to address the dual objective of poverty alleviation and women empowerment.The microfinance activities are carried on by Bandhan Financial Services Pvt. Ltd. (BFSPL), incorporated under the Companies Act, 1956 and also registered as a Non Banking Financial Company (NBFC) with the Reserve Bank of India (RBI).

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Performance of Bandhan Particulars

2002-03

2003-04

2004-05

Branches

2

10

54

Districts

2

5

8

Blocks

3

15

93

Panchayat

12

91

374

Villages

61

290

1,635

Staff

12

46

234

135

581

2,956

2,029

9,282

51,586

11

500

611

SHG formed Women members Growth of the Year ( %)2

Source: Karmakar, K.G., Microfinance in India 10/05/09

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Bandhan as on August 2009 No. of states

:12

No. of branches : 943 No. of members :18,42,546 No. of staff : 5,511 Loan disbursed this month : Rs. 190 Crores

Loan outstanding

: Rs. 850 Crores

Source: www.bandhanmf.org 10/05/09

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Name of the Funding Agency / Banks • • • • • • • • • • • • • •

ABN - AMRO Bank Axis Bank Bank of India Central Bank of India Friends of Women's World Banking, India HDFC Bank ICICI Bank IDBI Bank Indian Bank Indian Overseas bank. NABARD. Punjab National Bank Rashtriya Mahila Kosh SIDBI Standard Chartered State Bank Of India Bank Of Baroda United Bank of India Insurance: Life Insurance Corporation of India (LIC) Donors Consultative Group to Assist the Poor (CGAP)- an affiliate of World Bank Ford Foundation Freedom from Hunger (FFH) Unitus

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Lending Policy suitable for poor's Micro Loan Product • Group of 10-20 poor women. • loans are disbursed individually. • Attendance of minimum two successive weekly group meetings. • Assessment done by the staff & approval by the Branch Manager. Client Profile: • Landless and asset less women • Monthly income less than Rs. 2,500 in rural areas & Rs. 3,500 in urban areas • Individuals owning less than 50 decimal (0.5 acre) of land

Product Features: • The first loan is between Rs. 1,000 - 7,000 for the rural areas and between Rs. 1,000 - 10,000 for the urban areas • Tenure of the micro loan is 1 year, repayment in weekly installments.

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• Micro Enterprise Program: • Launched in January 2006 to cater to the needs of business expansion which demands a higher loan cycle, on realizing that certain members required this service. Criteria • Bandhan members who have completed at least one loan cycle • Those who possess capital equivalent to value of loan amount micro-enterprise which • Existing opportunity for at least one poor person

must

generate

employment

Features • The first loan ranges from Rs. 20,000 – Rs. 50,000 • These are one year loans and repaid in 45 equal installments

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Impact (Success Story): Sima Mukherjee

(32)

lives

with

her son

and

husband.  

They had a small stationery goods shop before she took a loan from Bandhan. Sudden death of her father-in-law brought restiveness in their family because the pension that her father-inlaw used to get was a major portion of their family income. She heard about Bandhan from her sister and took a loan of Rs. 3,000 in the year 2005 and started distributorship of Apna  Chanachur (fries).  Receiving Rs. 6,000 as her 2nd loan, in the year 2006, she invested half of that in her existing business while the rest amount was utilized in starting up of a new business of ‘soya nuggets’. In the year 2007, with her 3rd loan of Rs. 10,000 she expanded her businessMICROFINANCE and took distributorship of MPS food 10/05/09 24 products.

• A prominent transformation was visible in her lifestyle. She could give admission to her son in an English school, and a football coaching, also could provide a private tutor. She was in a position to take a bigger loan and a stable income allowed her to apply for a bigger loan under Micro Enterprise Program (MEP). With the MEP loan of Rs.30, 000 she wisely began   distributorship of Parle – G food products (basically biscuits). The current loan of Rs.40,000 has been utilized in her existing business only. She is now engaged in the distributorship of Parle – G, Apna Chanachur, Feel Good Soya Nuggets. She is possessing a carrying van and employing a driver and sales man for the same. After meeting all expenses her monthly net profit stands at Rs. 16,000 –Rs. 18,000. She is looking forward to take another loan from Bandhan once she finishes this one. •

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References • Karmakar, K.G.,2008, “ Microfinance In India, Sage Publication Pvt. Ltd., New Delhi • www.bandhanmg.org

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