Interview with Padamshree Aloysius P. Fernandez
Mr. Aloysius P. Fernandez
Mr. Aloysius P. Fernandez is Executive Director of rural development NGO MYRADA and Chairman of the Board of the microfinance institution SANGHAMITRA Rural Financial Services. In 2002 he was conferred with the prestigious Padmashree award.
Christina Weichselbaumer and Vikash Kumar talked to him at his office in Bangalore. Here are the excerpts :-
MF Focus: What is the distinctive feature of Sanghamitra as a Microfinance Insititution?
Mr. Fernandez: goes in where the bank refuses to give money. With Myrada we have an organisation which initiated and strongly pushes the SHGs bank linkage programm. But sometimes banks refuse to give money. Sanghamitra lends not to individuals but only to SHGs. There are three types of lending: One is to the individual, one is to the individual in the group, which is like a joint liability group, like Grameen Bank. And one is to the group, where you don’t ask for the purpose of the loan. We just analyse the group and then give a loan to them. The group then decides what each one wants to do.
MF Focus: How did Sanghamitra start, was there any specific trigger?
Mr. Fernandez: The Basic concept of SAG- Myrada started when a cooperative break down and people asked me what to do. They wanted to return the money but not to the cooperative because they have been cheated. So we finally said, why don’t you return the money to yourself!? So we worked out how to do it.
Later when we analysed the group we found out that the group members were linked with – what we call – relationships of affinity. That means mutual trust, mutual support, which is today called as social capital. This happened in 1984/85. And then we had about 300 groups like this, all based on affinity. Then we went to NABARD (National Bank for Agriculture and Rural Development) in 1986 and said we have an alternate system here. I was convinced if you want to get the poor into credit you need an alternate system. So why not give us some money.
MF Focus: was it only about the money?
Mr. Fernandez: No. It was about policy change. Lots of studies were made and we came to the conclusion that policy changes need to be made. We focussed on three aspects: One is that you should allow banks to lend money to unregistered groups. Second is, to lend and not ask for the purpose and third, to lend without physical collateral, if there was adequate social capital.
We found out that the dynamics of this discussion was an empowering shift, it created empowerment: Who to give and how much to give. Therefore 1992 as a result of this NABARD started the SHGs Bank Linkage Programm. But by 1996 we found out the banks are not lending enough, so we started Sanghamitra.
MF Focus: You always talk about self AFFINITY groups, not SHGs. Why do you make this clear distinction?
Mr. Fernandez: There are two issues. One is, the groups were founded on the basis of affinity. The people selected themselves. We identified the poor people in the village and said you form your own groups. Whereas the government, they have a list of so called „BPL“, below poverty line people and promoted SAGs. When the government made this official, we changed the name from self help group to self affinity groups. It is always about affinity, but this must be internal. It is not enough affinity that you have no house and a similar amount of money… We have a lot of poor people who don’t work together. But we invested in training the group, it was an educational process and the groups were based on affinity then.
MF Focus: Are there any special lessons learned while working with the SHGs methodology for years?
Mr. Fernandez: Of course, hundreds of lessons…
There are certain problems with the SHGs. The SHGS is not part of a delivery service chain. In other words: Don’t get the SHGs to do your job, to distribute food or work. SHGs are independent institutions with its own vision, its own work and its own activities.
Second: Every SHGs decides on its own livelihood strategy. If you study what sorts of loans people have taken over a period of 8 years you will see: They have taken loans starting with food, than going to clothes, going to health continuing with education, going to agriculture, buying land, starting business. So it’s a livelihood strategy. It didn’t start with goats first. It started with what they need.
We think a viable lifelihood consists of two cows or twenty sheep. But if you give them 2 cows, they can’t manage two cows. You need water, food – they don’t have that. Before taking a cow they need to do something else. They maybe get into trade, they may want return high cost loans first. They have livelihood strategies, but don’t take up one or two livelihoods which are viable units. They take lot of lot of smaller things which are managable for them.
When you look at this woman, Shanthamma, over a period of 8 years she took 20 loans for different things: household, cow, education, agriculture, for a job in railways, for telephone booth, for an SHG uniform… It is not one big viable unit, it is a couple of things. It’s a strategy. Not everybody wants a cow or doing trade…
MF Focus: What about the SHG’s potential to spread around the globe?
Mr. Fernandez: It was said, it won’t work in Myanmar, Myrada went to Myanmar, where we have 1000 groups, the same for Indonesia, now we have 5000 groups in Indonesia. There are 500 groups in Timor East and I don’t know how many in Bangla Desh. We have quite a large number of groups in Sri Lanka and we also have 300 groups in Iran now.
MF Focus: Are there any specific preconditions? Any special economical, cultural, social determinants?
Mr. Fernandez: Yes, there has to bee the traditional culture of trust which exists in all our rural communities. Not the whole community but groups of people with trust. There has to be social capital, without that the SHG-movement can’t work.
MF Focus: Which synergetic or antagonistic effects do you identify between the SHG-model and Grameen-model?
Mr. Fernandez: Microfinance is not synonymous with poverty. This is a mistake that they must go together. A painter, who needs paint – he is not poor. The vegetable vendor – she’s not poor… They need 5000 or 20000 Rs but they are not poor people. But where do they get their credit from? They have to go for Microfinance. And there is a whole set of Microfinance Institutions to cater different requirements.
MF can be used and must be used for the poor, that’s where it started but the demand for MF is much much bigger by the non poor. Because when it comes to the poor it is not only money they need, it’s empowerment they need, negotiating skills to train – and the Self Help Groups helps to develop these skills – how to talk, how to lobby, how to negotiate.
MF Focus: What are the biggest challenges you are facing now with MF work?
Mr. Fernandez: The biggest problem we are facing is the lack of understanding for the need of Microfinance, that is not only for the poor. It is a large group of people in India, who need money. That’s why the moneylender is thriving, the moneylender lends to both people, he is not an idiot. He lends to people who are capable of handing money. But he is lending at very exorbitant rates of interest. So, if you can compete with them – fine!
I have been to a village in the 80s and people told me they trust the moneylender most. More than banks. The moneylender is trusted, the bank is not.
MF Focus: Was there any special reason you decided to work in the development field?
Mr. Fernandez: Before 1971 I didn’t care about developement. During the Bangladesh War I was running a refugee program and discovered the poverty and the suffering there. What I have seen there changed my life. I went abroad than and when I came back my mission was to raise 1 million people above the poverty line. And I have done.
MF Focus: What do you think is important to know, for people interested in working with development issues?
Mr. Fernandez: The developement sector is not an afternoon cup of tea. It is not easy, it is tough. If you are not having crisis, you are not gaining anything. If you want to change something you will have problems. Development is a power game and about changing power relations. And change of power relations produces conflict. If you are not doing that it is not about development. Then you are delivering services.
MF Focus : What do you think about Microfinance Developement Bill –India ?
Mr. Fernandez: Did you read the bill? Than you shouldn’t ask. The MF bill is really/barely a load of rubbish! I don’t know why we are talking about that. It’s dead. Badly drafted, no way to pass it.
MF Focus: Thank you very much
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