Micro finance including insurance

Millions of poor workers, especially those working in the self employed or informal sector, in the world are caught in the vicious cycle of poverty. Inspite of their hard work, they remain poor, vulnerable, asset less, indebted and trapped in the continuous process of decapitalisation. Lack of capital is a very major constraint for the poor.

Lack of access to suitable formal financial services; compel them to depend on informal financial sources, which are exploitative.

They need suitable institutional frameworks, which provide them financial services suitable to them by devising appropriate mechanisms. e.g. they often need small finances in stages, without being able to any collateral. They need door-to-door service, simple procedures and other such mechanisms.

There are experiences all over the world that show that when such efforts are made by micro-finance institutions, NGOs or formal sector financial institutions, poor have responded positively by borrowing at market rates and repaying regularly, saving their hard earned imcomes and contributing toward other services like insurance.

These efforts of providing financial services to the poor have brought significant results in improving the living conditions of the poor, building their capital and assets, increasing their income and productivity.

The process of sustainably improving the livelihood of women working in the informal sector has many different components. SEWA Bharat’s strategy is an integrated approach that includes education, union activity, media outreach, lobbying the government for better policies at the national and state level. The provision of financial services can be understood as a link in the chain of activities that generate income and employment.

Micro finance is an important aspect of SEWA Bharat’s member organisations activities because millions of women working in the informal sector cannot currently access formal financial services. Many banks resist opening accounts for poor, illiterate women. “How can women who cannot even sign their names on basic forms possibly open and responsibly manage an account,” object bank employees.

And unfortunately, even when poor women are able to access formal financial services, they often prove unsuitable. Experience and research have shown that commercial financial institutions (FIs) in India pose the following problems for poor female clients:

• Credit is not easily available: Poor women cannot provide traditional forms of collateral, and are thus excluded from many loan programs. Moreover, illiterate women often find that they cannot cope with complicated loan procedures designed for middle-class clients.
• Transaction costs of borrowing are high: Standard loan applications take time to process, and poor women lose precious daily wages trying to obtain loans.
• Transaction costs of using savings facilities are high: Transportation to the bank, in addition to wages lost while going to the bank, also pose a cost. Assuming that poor women use their savings account once a month, an estimated 15 percent of their monthly savings will be spent accessing the account in the first place, according to studies conducted on poor women’s use of commercial FIs.
• Formal features of the banking system clash with women’s needs: The rigidity of loan terms and the lack of timeliness of formal credit, in particular, further negate the effects of low interest rates.

As a result, poor women find that they cannot save money, borrow money, or take out insurance policies. They are forced to turn instead to exploitative informal sources, like moneylenders who charge over 100 percent interest rates, or wealthy landowners, who force women to work for significantly reduced wages.

In this context, SEWA Bharat’s member organisations’ micro finance programs play a vital role for its members. They are successful because they are designed to provide basic financial services and counseling, while taking into account the needs of the poor. For example, women need small loans, but they cannot provide collateral, hence SEWA promotes the use of regular savings as security instead. Illiterate women cannot sign forms, so SEWA uses photographs. Poor women cannot afford to make regular trips to the bank, so SEWA provides door-to-door service.

A combination of flexibility, creativity in policymaking, and attentiveness to the ideas generated by SEWA members themselves has yielded micro finance models with proven track records of success. The challenge now is to ensure that each SEWA Bharat office/member organisation has the capacity to operate successful and self-sufficient micro finance programs.

Capacity Building 

Women need collective, organised strength (through their associations) to be able to actively participate in the planning, implementation and monitoring processes of the programmes meant for them and also in all other affairs of the nation.

This requires an ideological framework and clear direction that is understood by all the members. So all the members of the program must have common understanding of the vision and strategy and voices of these members must be taken to the public, to policy makers and to those persons whose help women need.

For activities, programs and management to be taken over by the local women capacity building becomes an essential need. The success of the program depends on how active the local leaders are in their capacity to involve their communities and to deal with the issues they encounter every day.

This task is based on our central belief that every body has potential and abilities. But this potential is often untapped or lies dormant because of circumstances, which keep women socially and economically power less. Appropriate training inspires participants to broaden their horizons and even take up new roles like starting balwadis, forming new SHGs, becoming health workers and group leaders.

Training is an essential tool for the capacity building. Poor women have little opportunity for their own exposure and development as they have hardly attended any formal school for long. Hence, they capitalize on any learning opportunity provided to them. Along with training exposure, information creation and dissemination is integral for capacity building exercise.

For training to be useful to women it has to gain their confidence and trust, be adjusted to their speed an learning abilities and begin with what they know ie their realm. Working with illiterate adult learner is a slow, steady process, requiring sensitivity and understanding of their lives.

SEWA’s experience has shown that women are eager to take leadership and develop in to strong leaders when supported with appropriate capacity building exercise. This is important aspect of enriching intellectual capital of SEWA Bharat’s human resources as it shapes the thinking, which along with resources is the basis of empowerment. The impact of this is beyond terminology as they become vocal in expressing issues of informal sector women workers’ at different forums and demand control in socio economic and political spheres.

Health Care

Being the poorest of workers, and living most often in environments without basic water and sanitation, SEWA members and their families are often sick. The high cost of health care often prevents an informal sector worker from seeking treatment, which may result in the worsening of her state of health. Poor health, when it results in lost wages and/or health care expenditures, leads to indebtedness, loss of assets and further poverty. In theory, government provision of health care should cover the poor, but in practice it often does not.

Through SEWA Gujarat’s experience and their own, SEWA Bharat member organisations have learned sickness is the major and recurring crisis in women’s lives. A study in Gujarat in 1977 of women who were not re-paying their loans regularly revealed that the major cause was sickness of the woman or her family members.

To tackle this SEWA Bharat runs health programmes for its members.

Employment Generation

The economic structure is directly linked to social structure. Barrier to entry to labor market as well as product market, for example are closely connected wit gender, caste and class. Further, social needs such as health and childcare, education and provision of social security are critical function of overall productivity and thus well being of women workers.

SEWA’s own experience over the year is that design and demand driven program that strategically links existing institutional partners, Government and Non Government can only be able to provide livelihood in a sustainable manner.

The approach should be market demand driven. Profile of successful micro enterprise show that concept of planning, business planning production and purchase plans, sales plan should be introduced, implemented and monitored vigilantly, if markets to be reached and profits to be made.

Housing and Infrastructure

Over the last fifty years there has been considerable urbanisation in India as rural migrants both rich and poor came to the cities and towns in search of employment. One of the outcomes of the laws, regulations and approaches to urban management that have prevailed over this period is that slum communities have come to constitute a large and growing percentage of the population in cities and towns. Almost 28% of the Indian population lives in the urban areas (2001 census), of these, approximately 67% do not have access to toilet facilities, 52% are uncovered by sanitation and sewerage infrastructure and 20% do not get safe drinking water.

The slum population in the urban areas consists of families working primarily in the informal sector where there is no well-defined employer – employee relationship and the workers and producers tend to be uncovered by social security provisions of any kind. In India, as in most developing countries, the informal sector is very large and growing. Although the informal sector workers area major part of the urban workforce, due to lack of Infrastructure facilities the productivity of this sector is much lower that it should be. This is especially true of women who bear the bulk of the cost associated with the lack of basic infrastructure. The major cost of poor infrastructure is in terms of the health of the slum population, which leads to continuous physical degradation and low productivity.

The lack of sanitation, clean drinking water and unhygienic surroundings has led the poor morbidity and mortality indicators among the slum populations.

Morbidity patterns among the slum population are high and reveal a preponderance of disease relating to water pollution. In study of women who have availed of SEWA’s health insurance scheme, it was found that 62.6% of women suffered from water related complaints. The highest number suffering from gastric problems including dysentery and typhoid, 20% followed by malaria, 12% and skin diseases 10%.
Such high levels of morbidity not only decrease the productivity and the quality of life of the slum populations but also lead to heavy expenditures in health care which often result in the family spiraling downwards in a vicious cycle of poverty.

SEWA Bharat’s sister organization, Mahila Housing SEWA Trust’s, Ahmedabad Parivartan project transforms the physical environment in which informal sector workers live, by providing a package of seven infrastructure services including paved roads, individual toilets, water and drainage connections and street lighting. The package is provided on an equitable cost sharing basis with the community residents contributing one-third of the cost. The project is implemented by a people’s registered body, “Community Based Association”, which represents the interests of the residents as well as maintains the newly acquired infrastructure. You can learn more about the project at www.sewahousing.org.

SEWA Bharat works towards promoting such projects in its member organisation and providing the most basic services such as water sanitation and health to the poor women of the urban slums of India. These aims are achieved in a demand driven and a financially sustainable way.