Beggars Can Be Choosers
Monday, August 22, 2011
A successful micro finance business model for the poorest of the poor is creating waves in rural Bengal.
At 7.30 AM, Bikash Dey Sarkar, an employee of Bandhan Microfinance, is out at work, surrounded by close to 150-odd villagers, watching him scribble a map on the mud floor of a makeshift community centre.
Sarkar is not a cartographer but is on an assignment to create a data bank of ultra low net worth individuals in far flung villages. He draws a map of houses, landmarks and roads on the wet mud, on the basis of verbal information from residents of Nainan village, about three hours from Kolkata.
Every penny counts, so the rough draft is copied on a paper after a consensus among villagers is reached. The initiative has attracted every resident of Nainan, where electricity is still a luxury and the barter system is still exists.
The map is the first step to sieve out the poorest of the poor, often a beggar. The next step is to create “wealth ranking cards”. For this, all families are assigned a card bearing their names. A group of elderly villagers is shown two cards at a time and asked to name the poorer among the two. The process culminates into segregation of packs of up to six bundles, of which one would have the name of the poorest in the lot.
Once the data is collated, the ultra poor are provided with assets for a regular livelihood, including agriculture, rearingof pigs or goats, or selling vegetable and handicraft. “The entire event is like a mini village fair. There is too much competition to qualify as the ultimate poor in every village. People are jealous of each other and so we keep digging out information, often in disguise to find our target,” says Dey Sarkar.
In 24 months, the beneficiaries qualify into mainstream finance, and in most cases become dedicated clients of Bandhan, the fourth largest MFI in India. Like most MFI borrowers, they pay 24-25 per cent interest on loans, with a zero default rate. The probability of default is bleak with the village community keeping a close tab on the borrower, as default is seen as the biggest stigma.
Bandhan, through its non-profit trust, decided to reach out to the ultra poor through its development program called Chartering into Unventured Frontiers – Targeting the Hard Core Poor (CUF-THP) in 2006, with 300 families. By 2014, Bandhan aims to reach out to 55,000 families under a new programme called, Abha.
In the last two years, out of the 5,000 families under the programme, 3,000 have qualified as regular borrowers, with 90 per cent emerging as clients of Bandhan. In fact, the Ford Foundation & The Michael and Susan Dell Foundation, Massachusetts Institute of Technology (MIT), US has been associated with Bandhan’s ultra-poor program in Murshidabad ever since its inception. For rolling out Abha, Axis Bank Foundation is also contributing to its funds.