Data Analysis and Interpretation
Case Study: Ankuram Sangamam Poram
Ankuram Sangamam Poram (ASP) is a non-profit NGO focused solely on dalitbahujans, who are the lowest strata in the Indian caste system and constitute 80% of India’s population. The overwhelming percentage of dalitbahujans in India are poor or very poor. I visited ASP in January and interviewed Jyothi Neelaiah, CEO of ASP and H. Dayanand, General Manager of ASP. The information in this case study is based on their interviews, information available at the ASP website, and several e-mail exchanges and telephone conversations I had with Neelaiah.
ASP is a multi-faceted NGO organization involved in livelihood promotion, capacity building, and microfinance. In this study, I focus mainly on its microfinance operations in an effort to compare and contrast ASP with commercial MFI entities such as SKS.
J. Neelaiah, ASP’s founder, stated the firm’s strategy as the following: The primary strategy is mobilization of the dalitbahujans, especially women; their organization as a network of independent and inter-dependent cooperative micro-finance organizations, and their capacitation for self-managed delivery of a wide range of sustainable micro-finance and livelihood services.
ASP has a three-pronged strategy to achieve its objectives:
• Focus on the poorest dalitbahujan women.
• Use an institutional approach at each level of the organization, i.e., SHG, Mandal level MACS, and the ASP federation. Client owned, operated, and used community organizations.
• Deliver a range of financial services such as savings, credit, insurance and nonfinancial services such as capacity development and livelihood promotion.
ASP operates as a three-tier, hierarchical model: ASP, Mandal-level MACS, and the SHGs-and it also has three primary operating themes: Ankuram, Sangamam and Poram.
• Ankuram means “a tender shoot.” This theme focuses on the livelihood and small enterprise activities in the farm and non-farm sectors where women and men can become members.
• Sangamam means ‘meeting point.” This theme focuses on microfinance and offers savings and credit activities exclusively for dalitbahujan women.
• Poram means “anvil.” This theme focuses on the leather artisans, helping to improve their economic activity by training and market linkages.
In this thesis, I focus on the Sangamam aspect, which offers microfinance services to the poor. These services can best be described by discussing activities in the three tiers of the ASP organization, i.e., at the ASP, Mandal-level MACS, and SHG levels.
Self Help Groups:
At village level, an SHG is typically formed with 15 to 20 members, with one or more SHGs per village. SHGs are self-managed groups that elect two members as leaders to represent their SHGs in the mandal-level MACS. Leaders also conduct bi-weekly meetings, administer financial transactions, and manually record them in the books. Leadership is rotated among the members every year. SHG members abide by certain group norms such as mandatory attendance at bi-weekly meetings and compulsory savings every month.
The most important aspect of the SHGs is pooling the members’ savings and rotating the money within the group to meet individual needs. Therefore, each member of the SHG must agree to compulsory savings of Rs.30 ($0.7) per month. Additional savings above and beyond the prescribed minimum is encouraged. The pooled money is distributed as small loans to members in need of credit for small enterprises and for various consumption needs. Loans larger than Rs.6″,000 ($140) are obtained from the parent MACs.
A Mutually Aided Cooperative is a legal entity under the Mutually Aided Cooperatives Societies (MACS) Act of 1995 in Andhra Pradesh state. Within the ASP structure, each mandal has one registered MACS, and all SHG members within that mandal become members. The general body of the MACS is represented by two leaders from each SHG, who in turn elect 11 to 15 boards of directors; the general body also elects a president. One-third of the board of directors retires every year, making room for new leadership. The board of directors meets once a month.
Each MACS is staffed by three full-time professional employees who guide the MACS leadership and supervise the SHGs. With its legal status, MACS acts as an intermediary to access external credit and other non-financial services for its members and as links to government agencies and development programs. The key success of the MACS lies in its financially self-sufficient operations. MACS receive a 4% commission on the lending it provides to SHGs. The costs for accessing credit are totally borne by MACS, although the parent federation provides partial support for non-financial services undertaken by the MACS.
The ASP federation itself is registered as a MACS under the Andhra Pradesh State MACS Act. It functions as a federation of all mandal-level MACS. The ASP federation’s general body is made up of presidents of mandal-level MACS who elect a board of directors from the general body.
ASP headquarters is staffed by 55 people, most of whom are computer literate. The primary function of the federation is to develop the processes and systems for operating the individual MACS and SHGs. The federation also develops various savings, credit, and insurance products, as well as the operating processes used by the MACS. The federation maintains relationships with various financial institutions and commercial banks and raises credit on an as-needed basis.
ASP has raised credit with financial institutions such as ICICI, Basic, and UTI. The current external borrowings of the ASP federation are around Rs. 8 crores ($1.9 million), which is provided to MACS for downward lending to SHG members. The average cost of funding for the federation is 11.5%, which is loaned to MACS at 17%, which in turn is loaned to the SHG members at 21%.
Very little technology is used at ASP. At the SHG-level and mandal-level MACS, transactions are recorded and tracked using the customary manual bookkeeping style.
However, uniform and consistent processes are followed across all SHGs and MACS. ASP operates in 11 districts and there is one computer in each district. There are about 20 computers in ASP headquarters and 30 of the 55 staff at headquarters use computers regularly to perform their daily duties.
The Excel-based Portfolio application and Tally accounting software are the two primary applications used. Portfolio is used to track loans provided from ASP headquarters to mandal-level MACS. It is granular enough to provide individual loan information. Excel reporting capabilities are used to generate management reports. ASP is actively looking to upgrade to a more sophisticated core banking solution and MIS system. However, ASP is taking a wait-and-see approach to automating the field operations until a viable, cost effective solution emerges in the market.
Summary of the Study:
In this study, I reviewed the current state of microfinance in India. In addition, two representative case studies were conducted as part of the research. The two studies were chosen not only to represent the two differing schools of thought in microfinance (for-profit commercial MFIs and not-for-profit NGOs) but also because they offer good examples of the two dominant microfinance delivery models used in India–the Grameen model and the Self Help Group model.
The study captures evolving legal structures, strategies, financing models, and operating models used by Indian MFIs to rapidly grow their operations in order to fulfill the huge unmet demand for microfinance. I also discussed the legal, financial, and technological challenges facing MFIs, and I recommended remedial measures and policy changes required to support the urgent need to expand microfinance services in India.