In West Bengal, Cashless Microfinance Opens Doors

NY Times 26th September, 2012

In West Bengal, Cashless Microfinance Opens Doors for Women

By SONIA FALEIROGolehar Sheikh with her daughters outside their home in Belekhali village in West Bengal, April 2012.

Sonia Faleiro

Golehar Sheikh with her daughters outside their home in Belekhali village in West Bengal, April 2012.

CANNING, West Bengal — A debt crisis in India’s microfinance sector in Andhra Pradesh in 2010 revived the question of how to help the hard-core poor without forcing them into a debt trap. Now it appears that microfinance institutions may have had an alternative all along.

The hard-core poor, or people who live far below the national poverty line, are vulnerable to even small changes in circumstance, from a shift in daily wages to the onset of heavy rains. Repaying a microloan can become an untenable proposition.

Exploring subcultures and forgotten communities.

This is particularly true of rural women, who accounted for 97 percent of microfinance loans in India in 2011 according to the data center MixMarket, but are less likely than men to be literate or to have the same skills and experience to earn as much. This is where a handful of microfinance institutions — among them Bandhan, currently India’s largest such lender — come in.

Bandhan’s Targeting the Hardcore Poor program was inspired by one pioneered by BRAC, a community development group, in Bangladesh in 2002. Bandhan’s program is not for profit and offers cash-free grants to selected participants in poor villages for 24 months. A “grant” refers to everything a borrower may need to start and ply a sustainable trade — everything, that is, but cash.

A crucial aspect of the program is lifestyle changes to advance good health and critical awareness. A borrower is taught to manage money, but is also made aware of the need to drink clean water and eat two meals a day. They’re schooled in basic numbers and letters.

The borrower, who is often a woman, never has to repay the cost of the goods. Only if she graduates from the program, though, by making a profit and adopting the lifestyle changes, will she be considered for a micro-loan, and, therefore, entry into the microfinance system. At this point she’s considered dependable enough to handle money, protecting herself while also reassuring the lender.

Sabuajaan Mollah, a resident of Dhuri village in West Bengal goes door to door selling trinkets.
Sonia Faleiro

Sabuajaan Mollah, a resident of Dhuri village in West Bengal goes door to door selling trinkets.

Sabuajaan Mollah, 54, lives in Canning, one of West Bengal’s poorest areas. She goes from door to door selling trinkets. Mrs. Mollah, who’s widowed, wasn’t just provided with the trinkets, but also a cane basket and plastic bags to carry them in.

When Bandhan approached Mrs. Mollah in December, she, her elderly mother and her 16-year-old daughter were surviving on just one meal a day. She worked as a domestic help in Kolkata, several hours away. At times her employers paid her in boiled rice. Mrs. Mollah now earns an average of 300 rupees ($5) a day and puts aside 10 rupees a week. It’s a small amount, but it’s more than she’s ever been able to save. “Now we eat twice a day,” she says.

Although the grant is cash-free, the program isn’t. Mrs. Mollah is given a livelihood stipend of 140 rupees a week to support her during the program.

Golehar Sheikh, who lives a few hours away from Mrs. Mollah, is who Mrs. Mollah hopes to become in 24 months. Mrs. Sheikh, 36, successfully graduated from Bandhan’s program in 2009. Since then she’s taken three successively larger microloans and hopes to soon own her own shop.

Every evening, Mrs. Sheikh takes a train to Kolkata, where she buys beef from the wholesale market on Park Street. At night she sleeps in the market, in a shared room paid for by local traders who want to encourage poor entrepreneurs like her to take their time shopping. The raw meat sits at the foot of her mat, bundled in layers of cloth, plastic and sacking.

At dawn, Mrs. Sheikh returns to Canning, covering as many as five villages on foot with her basket on her head. Beef is forbidden to Hindus, so Mrs. Sheikh, who’s Muslim, confines herself to Muslim-majority villages.

Eight years ago, after being abandoned by her husband, Mrs. Sheikh and her two daughters moved into a shack at the edge of someone else’s field. She begged for alms and foraged for fruit. Today, she lives in a two-room hut and has land of her own. Hers is still a difficult life, but she has assets she can count on should her luck again change. “I have dreams for my daughters,” she says. “And now I can help them come true.”

SKS Microfinance, the lender that triggered the Andhra Pradesh crisis, was also inspired by BRAC to create a similar program, which lasts 18 months. And Trickle Up, which offers a three-year program in four states, says that 100 percent of its borrowers, who are all women, have increased their net assets by an average of $330. Prior to graduating, the women had minimal assets and most were in debt. These programs, like that of Bandhan, are not for profit, and are funded largely (or, in the case of Trickle Up, entirely) by donors.

In 2011 the M.I.T. economist Abhijit Banerjee co-authored a randomized test of Bandhan’s program. He says that the team found “very strong positive results” and that it was clear that “beneficiaries were substantially better off in terms of how much they ate, measures of depression, schooling for children and other indicators.”

The hard-core poor have no liquid assets, which they require to pull themselves out of poverty. But putting mere cash in the hands of people whose immediate concerns are regular meals and safe shelter is risky for them and for their lenders.

This is why the bridge programs inspired by BRAC are so important. They offer the poor opportunity but without the initial risk of debt. But they also demand commitment and require change in the habits that may hurt the potential gains from microloans.

“I have a daughter to marry off,” says Mrs. Mollah. “So I work all day and worry all night. But I’ve seen a transformation in my life. What more can I ask for?”

Sonia Faleiro is the author of Beautiful Thing: Inside the Secret World of Bombay’s Dance Bars. Read her latest OpEd for The New York Times, ‘For India’s Children, Philanthropy Isn’t Enough.’

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