I was asked to contribute to an evaluation assessing the impacts of a recent livelihoods project done in partnership with one of India’s larger banks. We distributed farm animals that could be raised by people in rural areas and then sold for profit. We used women’s Self-Help-Groups (SHGs) to disseminate the information as well as distribute the materials for the project. Besides learning that chickens have a ridiculously high mortality rate (especially when not cared for properly…or when eaten prematurely) and that ducks are surprisingly hearty even in desert conditions, I got to spend a lot of time talking to people in the communities that we worked in.
One of the first stops that we made was a small village close to our office (<20km) to meet with an SHG group working with our livelihoods team. Side note: When I first heard SHG, I immediately pictured some sort of peer counseling/group therapy type of program. I was a little off the mark. It’s a business cooperative. Most these SHG’s have between 10-20 members, all of whom contribute a weekly sum of money (Something in the realm of 10 Rs) to a joint bank account. A bank account and a significant sum of money open many more doors and investment opportunities that wouldn’t otherwise be available without the collective effort. SHG’s working together can eventually form a federation, giving them even more leveraging power with the banks that allow for larger loans and in turn bigger investment. For the most part, small individual loans are handled within the group. The loan application is brought to the other members and then voted on. Larger loans are conducted through the local banks and is approved depending on typical bank criteria, e.g. your collateral and the nature of your business. Our organization helps by registering SHGs at local banks and conducting semi-regular meetings with each group. We also use them to disseminate information about projects we’re currently conducting.
Part of an SHG’s existence is to serve the very practical purpose of circumventing traditional channels of money lending. Those channels being a family member with surplus cash (unlikely) or a local moneylender (likely). By western standards (actually pretty much everyone’s standards), local moneylenders interest rates are extremely predatory. So much so that someone who borrows money on Monday could be paying back double that amount by Friday. SHG’s, much like microfinance institutions that were also created in a similar environment, offer a viable solution for those that couldn’t afford traditional money lending avenues.
But the SHG’s we work with have taken on some new roles in the community apart from our original plans. This is where I experienced somewhat of a moral dilemma. When these SHG’s had existed long enough to generate some significant capital, they started usurping the role of traditional moneylenders and lending to people outside the group at the same predatory rates. This clearly goes against some of my more utopian aspirations for rural development. Shouldn’t a village SHG loan to other community members at a rate that isn’t too burdensome for the borrowers? Shouldn’t the members, having created the SHG to alleviate some of their own financial burden, feel some sympathy for those who haven’t? Shouldn’t we as an organization mitigate this by placing restrictions on the SHGs by forcing them to only lend within the group or at reasonable rates? Looking back some of those questions feel rhetorical, but in case there’s any ambiguity I would have to say that my answer to those questions is ‘no.’
When we first found out that the SHGs were behaving in this manner, we acted like concerned parents, saying things like “well we didn’t plan for this,” or “This isn’t the way it should be!” It took some restraint, but in the end it seems that these SHG’s operating with us will be allowed to run their course regardless of these other practices. It might seem a bit callous not to intervene, but in the end what we’re doing is promoting entrepreneurship and ownership of these programs and to closely police them would undermine those goals. My feeling is that as long as we don’t disallow others to start their own SHGs we’re doing no one a disservice.
Many aid organizations seem to get into trouble when they plan too much. These innovative financial ideas were developed by pragmatic thinkers who filled a need that they grew to understand through firsthand experience with their customers. Social Enterprise was born out of this idea that alleviation of poverty needs to come from the ground up, that the market can dictate indicators of success because in the end people will pay for what is useful and ignore what isn’t. I don’t believe that social enterprise is the only answer, but then again it’s obvious that there isn’t one. In the end I’m happy to see our SHGs evolving organically as people become galvanized to build programs that piece by piece lead to better lives in their communities.