Women and rural finance

A women's thrift cooperative scheme in Andhra Pradesh, India is transforming rural lives. Unlike the more publicised micro-credit schemes such as the Grameen Bank in Bangladesh and SEWA in India, the cooperatives under this scheme emphasise thrift rather than credit and are wholly self-reliant in resources.

by Jayati Ghosh

MIDAM Veeramma works as an agricultural labourer in Makdumpuram village, in Warangal district of Andhra Pradesh. She is illiterate, and her daily wage earnings for the strenous work she puts in for paddy cultivation in the area are just above half of what male agricultural labourers there receive.

But for the past one year, she has also been the sarpanch of her village, and her voice has increasingly become recognised as one of the most respected and influential not only in her own village but in the surrounding areas. Her material conditions have also improved to some extent, but her social ascendancy is far more significant. All this is quite recent, and it can be traced almost directly to the effects of a process that is gaining strength in a number of villages in this part of Telegana, transforming the lives of many rural women.

The idea is an amazingly simple one – that of providing women with access to small-scale credit for uses determined by the borrowers themselves. Indeed, the more successful variants of it have received much publicity around the world – the Grameen Bank in Bangladesh, for example, or SEWA in Gujarat. But the design of this particular scheme in Andhra Pradesh, which has been operating to much effect over the past five or six years, is different from these well-known cases. These women's cooperatives, which have been assisted in organising themselves by the Cooperative Development Fund (CDF) based in Hyderabad, emphasise thrift even more than credit, and the credit operations are entirely self-financed, requiring absolutely no resources from outside. This makes them at once more viable and more independent, with the members of the cooperative free to evolve their own rules of operation and flexibility in functioning.

Since 1992, the growth in the women's thrift cooperatives organised with the help of the CDF in this area has been remarkable. In Karimnagar and Warangal districts alone, there are now more than 100 such cooperatives, organised into eight associations and with nearly 32,000 rural women as members. The expansion continues, as more and more villages are being drawn into this network. What is more impressive is that these have proved themselves to be financially viable units, with the rural women exercising their own control over accounts, and proving that these can be handled very responsibly.

Purely on the face of it, this may not seem so very significant. After all, fly-by-night financing schemes, chit funds and potentially dubious 'self-help' groups abound in India, especially in Andhra Pradesh, and it may seem that these do no more than provide temporary closure of the gaps left by official financing institutions and traditional village moneylenders. But there are at least two reasons why this current movement is of greater relevance. First, these have so far been very systematic and responsible schemes, with control and responsibility both borne directly by the members themselves. Since borrowing is directly related to total savings (usually a maximum of double or triple the total thrift of the member) there is a limit on the amount that can be accessed by any one individual; and since all the members have an equal amount of thrift every month, there is a sense of equality and shared responsibility about the finances.

Beyond petty finance

Furthermore, these women's cooperatives have effects that go far beyond the simple provision of petty finance. This comes out very strongly when they are compared with the men's thrift cooperatives which are being supported by the same organisation in the region, which have been less impressive, not only in terms of involvement and commitment of members but also in terms of the social changes brought about. The very processes of interaction and mobility outside the household, as well as the greater control over resources that such schemes involve, have changed social relations both within the family and within the villages concerned.

This has come about not only because of the particular condition of rural women, but also because of the structure of these cooperatives. It is well known that access to credit is a critical intervention for rural women, for a range of reasons. The nature of property rights in the subcontinent means that women are typically propertyless, even when they belong to better-off households, and indeed women from richer households may have even less access to any funds of their own because they are less likely to go out to work.

Greater reliability, more flexibility

Moreover, they also tend not to have access to institutional credit, without assets (other than perhaps gold ornaments) to mortgage and appearing not to be creditworthy. Even traditional moneylenders have been less willing to provide loans to rural women. These schemes therefore provide reliable – albeit small – amounts of finance where absolutely none was previously available. Because there are no contraints on the use to which such loans can be put, they also provide much more flexibility than government-sponsored schemes which typically do not allow much fungibility.

The cooperatives themselves are democratically run, with periodic election of members of the committee, one-third of which is replaced every year, and active participation of all the members through monthly savings and distribution of loans. This structure, which does not rely on the identification of target groups by government or other self-appointed do-gooders, is determined by the members themselves, who are dominantly from working groups and who appoint their own leaders. All this has been possible largely because Andhra Pradesh now has a much more liberal cooperative law, promulgated in 1995, which allows such cooperatives more freedom in their functioning.

There is a widespread perception that loans to rural women are used in emergency consumption and related avenues, and that little productive use can be made of the small amounts of credit that women can access under such schemes. But investigation reveals that unproductive consumption forms a very small part of the loans that are taken by rural women. It is true that some loans are certainly taken for lean season rice consumption and for emergency expenses such as hospitalisation, but these are entirely valid uses in a drought-prone poor agrarian context where many of the members of the cooperatives are operating at the margins of survival.

A significant proportion of loans is taken for expenditures which operate to reduce or ameliorate the unpaid labour of these women, for example, tap connections which ease water supply and save women the arduous task of water-gathering, gas stoves which ease cooking activities, and so on. School-related expenses for children are also important, along with improvements to the homestead such as roof tiling or flooring. There have been straightforward productive loans such as for the purchase of milch cattle and draught animals, or farm implements. A number of loans were used to finance petty trading activities, such as vegetable vending or setting up small shops and catering outlets, and several women felt that there had been a genuine increase in productive employment in the household as a result.

In most of the villages in which such cooperatives exist, the membership already covers 90% of the village women, across all social strata. And it is clear that the leadership in these cooperatives is not confined to more educated women or those from the better-off households (as is more the case in the men's thrift cooperatives) but is quite often held by poorer women such as Midam Veeramma. This has dramatic implications in terms of social interaction within the villages. Even though in these Telengana villages (where women constitute the bulk of the paid agricultural workforce) most women have been working outside the home, still membership of the cooperative has greatly increased such outside mobility for women. There is also much more mingling – on terms of greater equality as well – between women of different classes, castes and community groups in several of the villages. And most of them felt that they were now in a stronger position within the household especially with regard to financial and economic matters. The most significant change, across the board, seems to be the increase in self-worth and self-assertion of the women concerned.

So, while these micro-credit interventions have substantial effects in terms of creating and retaining savings within rural communities and providing some resources to those who are otherwise denied access to them, in the case of the rural women's thrift cooperatives the most impressive effects seem to be social. Midam Veeramma is still illiterate, but her children all go to school, and she herself sees the need for education as pressing. In several of the cooperatives, there has been a push towards adult literacy programmes demanded by the women themselves, who see it as essential for gaining greater control over their own lives. And the confidence gained in managing these cooperatives, by a whole range of rural women, is likely to be directed towards other social, political, economic and developmental issues. Obviously, such schemes are not universal panaceas, nor can they hope to counterbalance the effects of macroeconomic policies and processes which affect the region. But even this much is no small achievement for an essentially modest exercise in providing rural finance, which relies entirely on the savings of its own members. (Third World Resurgence No. 94, June 1998)

[c] The above article first appeared in Frontline (8 May 1998) and is reproduced here with the kind permission of its editors.

Jayati Ghosh is a Professor of Economics at the Jawaharlal Nehru University in Delhi, India.