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Presentation for Micro Credit Summit 16 November, 2010

By Shaheel Rafique, Implementation Support Specialist, IFAD

Transformation of the role of SHGs from mobilising savings and

credit for consumption smoothening and income generation to

managing aggregated businesses-

An IFAD experience in India

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Formation and Mobilization of Affinity Groups

Elements of Institution Building

• Support to Affinity Groups

• Book Keeping and Auditing

• Savings and Credit

• Bank Linkage

• Collective Actions

Tejaswini Project Maharastra

Example of SHG Loan Purpose

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Asset Cration, 11.9

HHD Expenditure , 30

Marriage , 2.9

Agriculture , 17.6

Business , 14.3

Livestock , 7.2

Education , 8.6

Health , 7.4

Transformation Process• Microenterprise

Development

• Formation and Institution Building for Federations

• Formalization for Aggregated Business

• Capacity Building During Transformation

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SHGs and Types of Federated Organizations

SI.NO. Name of Projects

Total Number of SHGS

SHG Federations

Producer Companies

Self-Reliant Cooperatives

Block Level Producer Association

Total Federated Organisations

1 MLIPH 1704 74 1     75

2 ULIPH 3552 43   75   118

3 PTSLP 7130 114       114

4 Tejaswini MP 12015 3       3

5Tejaswini Maharastr

a 55000 250       250

6 MPOWER 472          

7 JTDP 1455   1     1

8 OTELP 3821 12     2 14

9 NERCOMP -II 3168 103     103 206

88317 599 2 75 105 781 5

Factors Contributing to Transformation

• Learning to respond to markets

• Innovations for IGA and microenterprises as design features

• Saturation Approach • Innovative financing

for and by SHGs and CBOs

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Costs associated with Federated Organizations

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• Cost of formation of SHGs vary from INR 4800 to 6200

• Cost of formation and establishing FO /PC is INR 4.5 to 6.2 lakhs

• Cost of facilitation per FO/PC–INR 150000 to 200000

• Cost per producer is Rs 1243 to 2000 (including cost of facilitation)

• Cost of transportation /collection of produce -3-4% of total sale value

Uttarakhand

• Initial Cost of Spices processing and branding by 600 producers is INR4 lakh Annual cost in INR 200,000 for providing support price to members and promotion cost 50,000

• Dairy collective marketing 436 farmers is INR3,60,000 ; income /member/year INR 6190

Jharkhand

• Collection and value addition Producer company in Jharkhand cost of establishment INR 618,000- First year done business up to INR2,50,000.

Meghalaya: Transportation business, Tea Manufacturing, Termuric value add

Support to Federated Organizations

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• Service Providing Company as substitute of the PMU

• Skill Training-Bylaws, Value Addition, Marketing& promotion, Management and Accounting, Leadership

• Marketing

– Maximum support price declaration

– Payment at collection point

– Branding

– Linkage with Private sector-Mega mart, Patanjali, Sarash (for spice)

Impact of Transformation

• Empowerment of Rural Communities particularly Women to participate in Economic Development

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Key Outcome Indicators-(2009 ) Indicators %

% persons reporting increased income 54

Empowerment of women (%feeling of personal empowerment) 54

% persons reporting increased in Assets (Households) 58

%Persons receiving project services 74

%Active borrowers 51

% women having access to credit 80

%Persons trained in crop & livestock production & development 27

% of farmers adopting technology recommended by project 44

% of farmers reporting production or yield increased/herd size 187

% households reporting improved food security 62

% of active savers 94

Number of Government Schemes Covered 6

% of households covered under NREGA 28

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Challenges in the TransformationProcess

• Low literacy rate, lack of access to financial institution, low access to markets

• Improving Business and Transaction Capacity

• Business Development Services

• Empowerment and Capacity building during the transformation process

• Financial Services

• Governance of second-level institutions/federations/producer companies/self-reliant cooperatives

• Leadership

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Thank you!

Questions?