By Smita Premchander and V. Prameela

Microfinance Focus June 15, 2011

This paper is written on the basis of Sampark’s experience of working with the Scheduled Castes, who are among the poorest in the rural areas of Koppal district of Karnataka.  Sampark works with 230 groups and 3300 women.  While the SC and minorities constitute just about 3% of the population in this area, Sampark’s focus on reaching out to the poorest has resulted in 20% of the SHG members being SCs.  The SCs are among the poorest and most neglected, lack physical, financial and human capital, and are caught up in a vicious cycle of poverty.  Their SHGs and federations tend to take much longer to become creditworthy, viable financial forums.  Working with these groups requires the programme strategies to be flexible and multi-dimensional.  Above all, it needs long term and consistent support.

This paper is based on Sampark’s experience for the past decade, in working with some of the poorest people in the Koppal district of north Karnataka.  The lessons are shared from direct work with 3300 women members of 230 SHGs.  These results are validated in Orissa, Bihar, tribal belts of Andhra Pradesh and Nepal, where Sampark has done research and evaluation assignments with projects covering over 200,000 households.  Income poverty is highly linked with caste, and minority and low income status combines to result in a cycle of poverty which is difficult to break, requiring significant and consistent external support.

1. For Those in Minority, Life Begins on the Sidelines

The housing pattern in villages is very stratified.  The richer and ‘higher’ castes usually live nearer the main roads, their houses are larger, better built, and in areas which are higher and their localities are cleaner than the rest of the village.  The main temples, school buildings and government buildings if any are located nearer to these homes.

Typically, the scheduled castes and other religious minorities live on the outskirts of the village, in low lying areas which get flooded in the rains, and garbage dumps are a common sight.  Their houses are usually small, thatched or tin roofs, and animal sheds and makeshift toilets, if any, just outside the main doors.  In this environment, schooling is not easy.  The environment at home is not conducive to studies, where a child can peacefully engage in learning.

2. Poverty and Lack of Assets

Those who belong to Scheduled castes are typically landless or marginal farmers, depend fully or partly on casual farm labour, migrate frequently for short or long periods, and have few assets other than human labour to earn from.

3. Low Human Capital

Typically, SCs are less educated and have fewer skills than those belonging to other castes.  The cycle begins in childhood.  When children are unable to cope with studies, they lose interest, absenteeism increases; teachers lose patience, eventually the children drop out of school.  They also drop out because household chores need to be done, siblings need to be cared for, goats or cows need to be grazed, or the child has to go for farm labour to earn for the daily food requirements of the family.  The quality of school education is low, with high teacher absenteeism and lack of interest in teaching.  The SC children have a high school dropout rate for these reasons, and are invariably lesser educated than their counterparts among other castes.  This limits their livelihoods options for life.

4. Vicious Cycle of Poverty

Scheduled caste people struggle in the vicious cycle of poverty.  Due to low literacy, low income levels, and lack of time, they are not even able to participate in SHGs.  Nor are they able to take other opportunities offered by NGOs such as vocational training.  They do not have the time or resources to be able to give up their wages and augment their own skills, even for a day, leave alone for several months as needed in skill training.  So they are not able to build their capacities.  As they lack risk bearing capacity, they are not able to take large loans for business and earn more money so they remain poor.

5. Widening Gap between the Well off and the Poor

By contrast, those who are not from the SCs, and are relatively better off, with some land, education, other assets like better homes and cattle, can aspire to grow.  They need big loans to start business and increase their family incomes.  They are able to participate in skill trainings and augment the human capital in their households.  Improved skills and earnings results in increased confidence, and more investment in livelihoods such as children’s education and delayed age of marriage of girl child.

6. Participation in SHGs and Federations Becomes Difficult

\As said above, those who are poor (SCs and some among muslims) often migrate out for earnings, and are not able to join or sustain group membership.  Even when they join SHGs, they have irregular and low savings.  Typically, scheduled caste SHGs have lower savings and loan taking capacities as compared to those with better off members.  The slow build up of capital also entitles them to smaller amounts of external capital.  The average savings and loans in Sampark’s SHGs is given in Figure 1:

Figure 1 Savings and Loans of SC  and General Caste SHGs

Such groups have one or two literate members, if at all, and so accounts keeping becomes difficult, making it more difficult for these groups to achieve high grades for creditworthiness.  Further, they are besought with leadership problems and internal conflicts, especially if some members are unable to pay the internal group loans that they have taken.

Thus organization building is much more difficult when working with SCs.  SHGs of SCs take longer to stabilize, and federations of SC groups are slower to form and stabilize too, compared to those where the general castes predominate.

The Devadasi system derives from an age-old traditional practice of offering young girls to the Goddess or God in the region, to be dedicated to service to the temple.

7. Leadership and Accountability

SHGs and federations of those who are poor, scheduled castes, devadasis  are more fraught with fights and conflicts.  When the leaders are more educated, they control accounts by virtue of their higher literacy.  More vocal leaders wield influence arising from better articulation. And SHG/federation leaders linked to religious leaders wield derived power.  Over time, their power results in greater access to financial resources of the group or federation, with lower accountability to repay on time.

Equality of members can be ensured only if all members have a basic understanding of finances (role of financial literacy) and if there are processes and monitoring systems to hold the leaders accountable.  Some NGOs conduct member trainings, and have a system of leaders’ rotation, however, this results in high costs of leader training.  Further leader-rotation cannot be forced in a democratic system, and often group members prefer to choose a more articulate leader who can access external resources, rather than one who is accountable but not resourceful.

SHGs are also social spaces. Relationships among leaders and members are not just financial, they are social relationships.  It is social affinity that was the foundation of the SHG in the first place.  The focus on financial transactions without acknowledging the social relationships is not going to result in viable and long term financial relationships.

As SHGs and cooperatives grow, if financial transactions take over all the processes, then they cease to be empowering organizations.  The more attention that promoting institutions pay to financial issues, the less they pay to social issues, thus affecting negatively both long term coherence and integrity of these organizations, as well as their empowering impacts.

8. Attitudes of Dependence Intervene

When an NGO seeks to reach out to the SCs and the poorer sections, it makes an effort to be more inclusive, and design programmes that would allow them to participate.  Sampark ensured participation of SC groups by making the savings and attendance norms very flexible, by allowing very slow accumulation of capital before loans were given, and by investing Sampark money when the groups could not yet access bank finance.  A lot of effort was put into financial literacy, training leaders and account keepers, and paying staff for much longer in SC federations than for the federations of other caste groups.

Yet, the SC groups are the last to acknowledge these investments.  They are so used to hand-outs given by the government.  While subsidized loans are a benefit they are entitled to, it was difficult and took a few years to instill repayment discipline for subsidized loans.  Some NGOs in Koppal indulge in corrupt practices, and many SC households believe that government benefits are to be obtained at a small fee, including loans.  This makes it difficult to establish good loan and repayment practices and systems.

9. Strategies: Three Key Mantras

Three strategies that have helped, and could be followed as mantras:

I. Introduce Flexibility

External standards can be too rigid and inappropriate for SC groups.  Allow them to save lower amounts than general caste groups, to accumulate slowly, to retain group memberships during several months of migration, and to repay in flexible and long term installments rather than in fixed installments over short periods such as a year.

II. More and Multi-dimensional Investment

SC and extreme poor households need several types of investment.  The Sampark package includes SHG formation, cooperative formation, enterprise awareness and credit linkages.  Alongside, Sampark works to prevent school drop-outs; offer support to children to pass 10th class, skill training, and community based mental health support and literacy for empowerment.    These multi-dimensional investments at the household level help not only the current, but also the next generation to attain sustainable livelihoods.

III. Take a Long Breath

It takes much longer to cover the same distance with SC groups and minorities than with general caste groups.  This requires that the donor and facilitating NGO take a much longer perspective, typically allowing for 3 years for SHGs and 5 years for federations to stabilize.

10. Benefits of Participation

When these strategies are followed, significant results can be achieved.  The divergence between general and SC groups can grow, however, as the former have a head-start and have a much steeper learning curve and growth path.  Even so, SC groups and individual women can have significant benefits, as can be seen from the story below:

Gangavva is 48 years old and belongs to Bibifathima self help groups in Kampli village.   She shared her experience after being a member of SHG.  She says that “After I became a member of SHG, my family income has been increased, and I am able to see the Bank and know whom to contact for accounting my savings and to whom I have to contact for a loan.  As I am able to take loan whenever the family is needed, my husband now consults me in taking family decisions including financial matters.  She also said that “before forming SHGs I was not having access to have rice in my meal because during that time rice price more than jowar so my mother in-law did not allowed me to eat rice.  Now as I have money in my hand I can eat what I want at home even if I get bored to eat at home once in a while when I am in Koppal town I go to hotel and order what I liked to eat. ”

There are several such examples, where women have been able to refuse money to alcoholic husbands, get their widow daughter remarried, attain higher access to money and other resources, and in general gain a higher level of self esteem and independence.