Sreelatha Menon: When communities own MFIs

Comfis, or community owned micro-finance institutions, offer the right balance between micro-finance and removing poverty

Japan is not known for microfinance but a Japanese philanthropist is experimenting with it to help leprosy patients in India, using a form that is not popular with micro-finance institutions. Yohei Sasakawa, who chairs the Nippon Foundation and has started the $10-million Sasakawa India Leprosy Foundation (SILF), has used micro credit in a unique way. The foundation charges very little interest, is community-owned and may qualify to be called a community-owned microfinance institution, or Comfi.

SILF uses micro credit as a tool for livelihood generation in about 17 colonies of people who have recovered from leprosy, following the footsteps of several small Comfis in the country.

The money goes to a kitty owned by the colony, and hence colony members ensure that the borrower returns the money, says Sasakawa. A six per cent rate of interest is charged as community fee, which also goes to a fund for the disabled in the colony who are often abandoned by their families.

While most groups which have borrowed from the foundation are engaged in work that is low on technology like vending, dairying and goat-rearing, the Sasakawa India foundation has trained some groups in Madhya Pradesh to make batteries, which they give on rent. He is persuading industries in the manufacturing sector to get their units made in leprosy colonies. He wants to link micro credit with industry and empower all the 700 leprosy colonies in the country that his foundation has mapped. Sasakawa’s small experiment is at the heart of many Comfis in India.

A study on Comfis by Girija Srinivasan and N Srinivasan describes them as institutions which have the potential to provide quality financial services without comprising on social and customer concerns.

The study, which documents six successful Comfis, says surpluses made by these are reverted to the community.

A GTZ survey found that 58 per cent of all microfinance organisations were community-owned. But, these accounted for hardly seven per cent of outstanding loans. These are mostly MACS, or cooperative organisations registered under the Mutually Aided Cooperative Societies Act.

IIMF, or Indur Intideepam MACS Federation, based in Andhra Pradesh’s tribal districts of Nizamabad and Adilabad, is one such entity. A federation of 20 mandal-level MACS, the federation functions as a bulk financier, sourcing loans from banks and other financial institutions for lending to MACS.

IIMF gives loans to MACS at 13 per cent and MACS in turn provide loans to self-help groups at 18 per cent. But, despite a member base of over 45,000, it is feeling insecure due to competition from other lending agencies, say the authors.

In comparison, a smaller Comfi, such as the Bagnan Mahila Bikash Credit Cooperative Society in West Bengal, leads a happier life by not emphasising on loans. Only one-third of its 18,000 members have taken loans and the rest are benefiting from saving schemes.

There is a big list of such Comfis, including Kalanjiam Development Financial Services, which is spread like a web all over Tamil Nadu. It was started by the Dhanam Foundation. Another is Sewa Bank with 64,756 self-employed poor women as members. It provides services such as micro savings, micro credit and micro insurance.

SIFFS, or the South Indian Federation of Fishermen’s Societies in Kerala, is a network of fish workers cooperatives with its unique model of credit and deposits which takes them closer to the goal that founders of institutions like Grameen Bank and Sewa Bank envisaged for micro-finance.