Financial Daily from THE HINDU group of publications
Wednesday, Jul 14, 2004
Micro-finance, the rural saviour
(Recently in Madurai)
But that does not mean their distress levels have not reached alarming proportions. A visit to the villages in the Madurai/Theni belt last fortnight showed that most farmers are in considerable debt. The only curious difference between these farmers and their Andhra Pradesh counterparts, many of whom have committed suicide, is that the former do not seem to be under such tremendous pressure from the moneylenders.
Seventy-year-old Chinnamuthu is a farmer owning two acres in Echampatti village, about 45 km from Madurai. Till a couple of years ago, his land sustained him and his three sons. But the drought years have taken their toll; at first, his well dried up and then the bore-well too. Twice, he borrowed Rs 20,000 from the local moneylender at a killing rate of interest 48 per cent for sinking two borewells but both dried up. Today, he has no water to irrigate his land and is under a debt of Rs 50,000. But he is able to survive because his sons have gone away to Madurai, where they work as head-load workers in the sand mining industry. "When there is work, they make about Rs 150 a day. They send us a few hundred rupees every month and we are able to somehow manage," he says.
There is no way Chinnamuthu can repay his loan and, with this kind of interest burden, it doubles every two years. But, strangely enough, he and other farmers in this village point out that the moneylenders are not harassing them for repayment of the loan.
Says Kuppusamy, who has seven acres and has run up a debt of Rs 50,000 with the moneylender in the elusive search for water: "They know very well that our condition is so bad that many of us are trying to sell at least part of our land. But where are the buyers? Who will want to invest money in a land that does not yield anything? Those of us who are harassed by moneylenders, we tell them plainly `you buy the land', but they don't want it either. So they are waiting patiently."
But Chandrasamy, another farmer in Salupapatti village, about 33 km from Madurai, is not so lucky. He has a debt burden of Rs 1.5 lakh, again borrowed at a whopping 48 per cent interest, but from four different moneylenders. "Oh yes, they do keep asking for the money, but I keep dodging them. What other option do I have till the rains come?" he asks helplessly.
One cannot help admiring the courage and optimism of these farmers when they say that if the rain gods are kind for three consecutive years they will be able to wipe off their debts. "Give us three years of good water and we will repay all the money. We are willing to work very hard, but we need water," says Kuppusamy.
It is heart-rending to see that many of these farming families have sent away their teenaged daughters to big cities such as Coimbatore or Tirupur, almost as bonded labour, though for a limited period of three years. As mentioned earlier in these columns, these girls work in the textile mills of Coimbatore or the hosiery/garment units of Tirupur, where they are given food and accommodation plus a monthly wage of about Rs 300-400. At the end of three years, when the girl returns home, she gets a lump-sum payment of Rs 30,000-35,000.
The experience in this region has been mixed when it comes to the treatment meted out to the young girls. While some parents are happy at the experience and point out that they would rather pull their child out of the hot sun and the fields and let her work inside a factory, others complain that the girls were made to work for long hours, which sometimes stretched to midnight, or that they were poorly fed. The saving grace seems to be that as no advance is paid, the parents can recall the daughter any time if they feel she is being exploited.
One interesting link noted during this visit was between the distress in agricultural families and the relief they got in some form or the other thanks to the micro-credit movement. As NGOs such as DHAN (Development of Humane Action) and SIRD (Society for Integrated Rural Development) work with both the farmers as well women's self-help groups (SHGs), one can see the dynamics operating between the micro-finance schemes and water conservation schemes for farmers.
DHAN Foundation has provided an enabling model for the farmers in many districts of Tamil Nadu, Karnataka and Andhra Pradesh to fight fiercely for the right to water for all farmers from the natural tanks and ponds in villages and to rid them of encroachments, most of the time from the bigger players in the field.
Towards this end, it works with farmers' organisations and has helped revive hundreds of tanks, with not only the participation of, but also partial funding by, the farmers themselves. But because these tanks and ponds are dependent on rain for their regeneration, the smaller ones have dried up. However, with the women in most of the farming families being members of an SHG, it is thanks to the loans taken from the group and put to productive use that many families have escaped starvation.
It was interesting to find farmer after farmer telling you in these villages that, thanks to their owning two-three milch cows, bought with the help of loans from the SHGs, that the families were able to tide over the drought years by selling milk to co-operative societies or private dairies.
Coming to what micro-finance has done to these groups and the kind of poverty alleviation that has taken place, Mr K. Narender, Chief Executive of Kalanjiam Foudnation, a subsidiary of DHAN, says that over the years, as the women repay smaller loans and go for bigger loans, an improvement in their lifestyle and status takes place. He denies that women in micro-finance get caught in debt trap. "There is a clear graduation process in the groups. We don't dump money on the women and they begin with small loans and only gradually the loan size increases."
As micro-finance projects are targeted at the poorest of poor women, the income generating activity is important. But DHAN's approach is to try and strengthen existing activity. "Most of the time people are comfortable doing what they are familiar with. So there is no point in dumping something new on them," he says.
But he agrees that conceptually, there is a need to introduce new economic activities though there are not too many opportunities in the rural areas, and something new cannot be created overnight. "That is why a substantial amount of money goes to such existing operations as dairy, poultry, sheep-rearing or agricultural activities, petty shops, and the like."
But among the senior groups, poverty alleviation has indeed taken place. Mr Narender gives the example of one the Kalanjiam's federations (formed with 200 SHGs) in Tirupati Sri Padmavathy Mahila Abhyudaya Sangham that is 10 years old and has about 10,000 members. "Over 40 per cent of them have come out of poverty and this is visible. They have constructed houses, got all the assets that any middle-class family has, such as a TV set, electronics gadgets, etc., and their incomes have stabilised," he says. One of its members Hamsamma (45) earlier ran a small bakery in Tirupati with a simple mud oven. After 10 years of micro-finance her monthly turnover has gone up from Rs 3,000 to nearly Rs 2 lakh; she has increased the number of products, has a fully automatic oven and employs 15-20 men and women.
"Now she goes on her own to the banks to negotiate larger loans and her husband is assisting her in the business," says Mr Narender, admitting that this was possible in a town like Tirupati and a turnover of Rs 1 lakh would be very difficult in the rural areas, where it takes more time to come out of poverty.
So, in the future, should the smarter women move to the urban areas from the rural areas? "No, that is not the answer. We say there should be linkages between rural and urban areas but we do not try to promote migration. Ultimately we need to invest more in the rural areas. That is why the emphasis of our business development units is to try and build new skills for members," he adds.
With the SHGs also taking up such issues as female foeticide, alcoholism, usurious lending and even dowry, though the last more cautiously, and playing a bigger role in gram sabhas, a tiny revolution is certainly taking places in our villages.
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