Economics of Credit Co-operative

Franco spoke at the AID-India conference held in Chennai in 1999.

TODAY MOST PEOPLE ARE WORRIED only about themselves, but working abroad you have actually bothered about the society from where you have come, so I appreciate that.
As Kalpana said, ours has been a self reliant effort, aside from an initial investment of Rs2000 from TNSF. After that we have not accepted anything from anyone.
This is how we do it:
Interest on savings is 12%
Interest on loans is 24%.
3% is used as incentive for coordinator of the savings group.
3% is used to make the passbooks, rubber stamps, monthly newsletter.
The coordinator will not get anything initially but as the savings grows, she will get some compensation for her running around to banks, etc.
We began the newsletter last year with a translation of an article by Amartya Sen that had appeared in Frontline. This is how the organisation is run on a self reliant basis.
What is the need for organizing this kind of group per capital income in our country is $390
52% earn less than $1/day (this is the international poverty line)
80% earn less than $2/day.
Most of these people do not get any credit facility, despite having a vast network of banking institutions in this country. I myself work for a bank and I know how enlightened we are in giving loans to the poor. So there is a great need for the people to come to this kind of informal credit system. In what way are we different from the major examples of such systems?
You must know about Grameen Bank, or SEWA experience. These are heavily funded, though initially they have started on a small level. They have grown largely due to international funding, whereas we do not accept international funding. We do go to banks for loans and SBI has given us Rs. 6 lakhs. We do not depend on government funds, and because of that we are able to conduct the empowerment component as well. We do not hesitate to oppose government policies.
What can be done by us? Now 12 districts in TN have adopted this system. From Jan 11-14 we are organising a training program in which women from various states are participating. They are going to copy this in 15 other states, it can become a large network in the country. We are also linking other campaigns like health, legal literacy, and right to information.
I have a few suggestions for AID
1. You can start a bank for microcredit. You can give loans and you can also get refinance of the loan from NABARD
2. You can help in selling our products. We have units making nutrition mix, crafts, etc. If you can help us to market abroad we will be very grateful.
3. People project that after 5 years, many people working abroad may come back because of policy changes taking place. You can create consultancies so that those who are committed to this kind of work can join organisations like Malar, TNSF, or so many organizations ?they can earn, though not as much as abroad but can get great satisfaction.
4. Lobbying abroad, especially with international agencies, wherever it is possible. The Third World has paid much more than it has borrowed, and it is still indebted to international agencies. In 1980 developing countries have borrowed $658 billion, by 1997 paid $2700 billion still owe $2000 billion. We are now only borrowing to pay the interest. In this years budget 75,000 crores are allotted for interest alone. This is the way we have been paying the first world. So please lobby with these agencies to change their policies, to write off these loans.

Question: Can you tell us more about the structure of MALAR?
Susila: how do you ensure the repayment?

Question: what is the default rate?

Ravi: what is the total scale of loans that TNSF as an organisation, or in its branches, can handle?

Raman P: why do you say that you don’t want any money, but then you are asking us to lobby the agencies for money?

Franco: First, about the organisational structure. Initially it was very informal. Slowly we developed into an elected committee. We have a rule that only women can be on the executive committee. So I am only an advisor. The groups have a president, secretary, and treasurer. At the block level, they elect a block coordinator. At the district level, the block coordinators themselves become the district committee.
For opening accounts, banks were giving lots of problems. Why are you trying to open accounts with Rs. 50 or Rs. 100/. they would ask us. So wherever possible local people met the bank manager themselves, otherwise the block coordinator may come to help. Similarly whatever problems may arise at the block level, they may go to the district level for help.
Repayment, how is it done? A collective decision on lending is taken in the group. They decide to whom and on what basis. All the members sign the minutes book. Others will question if one defaults. There is also extra interest as a penalty. If a person is defaulting, she might not come to the meeting, so they will go to the woman’s house. This is embarrassing. In some cases they may not repay for some pressing reason. In such a case the group may cover for her. That type of commitment to help people when they are in need has also come about.
You were asking about the total loan TNSF can handle. TNSF as such will not be handling the money. In every district there is an independent organisation. In Kanyakumari it is Malar. Malar can handle a crore. Already we are up to 92 lakhs. It depends on the growth, number of units.
About the last question, I was not talking about lobbying for money, but lobbying international agencies to revise their policies towards the third world, and if possible to write off the loans which are just a form of looting by the first world countries. And about AID forming a bank, I was only suggesting that you could setup a bank and instead of giving grants or in addition, you can give loans. In India there has been a tendency to get everything free, that has to change. There may be cases where you have to give something free, but in many cases it is better to give in the form of loans.
I also want to thank Balaji and Sandeep for helping with a book we made on microcredit. All the cartoons are designed by Sandeep. Balaji has redesigned the text and given it the name, United We Sit.

is a Bank Manager at State Bank of India, Nagercoil. He coordinates the Kanyakumari District science forum and advises the district-wide women’s savings movement.

We have for over a century been dragged by the prosperous West behind its chariot, choked by the dust, deafened by the noise, humbled by our own helplessness, and overwhelmed by the speed. We agreed to acknowledge that this chariot-drive was progress, and that progress was civilization. If we even ventured to ask, progress towards what, and progress for whom?
It was considered to be peculiarly and ridiculously oriental to entertain such doubts about the absoluteness of progress. Of late, a voice has come to us bidding us to take count not only of the scientific perfection of the chariot but of the depth of the ditches lying across its path.
Rabindranath Tagore

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