Kalanjiam Community Banking Programme

Community Banking for Poverty Reduction

Banking “By the People, of the People and for the People” is the philosophy behind the launch of Kalanjiam Community Banking programme in DHAN Foundation. The genesis of Kalanjiam Community Banking Programme of DHAN Foundation in 1990 was a result of its analysis of rural poverty situation that revealed rampant exploitation of poor by the moneylenders. It was in contrast to the scenario of vast network of Government owned commercial bank branches that had been mandated to lend to the priority sector for benefiting the economically weaker sections of the society. The basic premises of designing the “Kalanjiam Community Banking Programme” was to build the capacities of the poor and enabling them to manage financial services and build strong, sustainable Peoples’Organisations to address their development needs.

The Concept of Community Banking incubated by DHAN took a shape of a Programme to reach the poorest poor section of the society, create lasting changes in their lives and livelihoods, and widen the impact by deepening its interventions.

Organising the Unorganised: Building Social Capital

The concept of promoting People’s Organisations around development issues is a unique contribution of DHAN Foundation. Organising the un-organised poor communities into self–governed nested institutions is a key determinant for achieving sustainable livelihoods. The collective strength gained as result of it would enable them to work in collaboration with the mainstream to gain access and control over financial capital through linkages with banking and financial institutions; enhance human capital by building appropriate production and marketing skills; create and strengthen physical capital in the form of income generating assets.

Community banking initiative of DHAN has led to promotion of 225 self-governed federations of SHGs promoted among economically and socially disadvantaged women, farmers and fisherfolk by organising about 1.5 million poor households into 55,000 self-help groups across urban, rural, coastal and tribal contexts across 14 Indian states.

Exploded the Myth: Savings first

The Community Banking initiative of DHAN exploded the myth that the “Poor cannot save”. They have clearly demonstrated the success of the savings–led microfinance model. Savings bring equity and builds ownership by the people at the grassroots level. It educates the poor about their rights and ensures that their entitlements for financial services actually reach them. The savings that the members mobilize in their groups are again provided as loans to members in need of credit to meet their consumption and production needs.

Savings of the SHG members have reached a level of Rs. 499 crores in their institutions, which was instrumental in mobilising credit from the commercial and regional rural banks.

Exploded the Myth: Credit Next

Continued access to credit at the SHGs has enhanced livelihood opportunities for the poor and helped them create productive assets, which in turn has enhanced credit absorption at household level. The SHGs lend to their members to meet both production and consumption needs. Customised credit products have been evolved to meet the special needs such as incremental housing, electricity connection, access to water and sanitation.

The loan outstanding with all the members in their SHGs stood at Rs. 798 crores, of which 64 per cent of the total loans were deployed towards asset creation and livelihood promotion

Exploded the Myth Insurance is Must, Pension-the Best

Another critical input that can address the multiple risks and vulnerabilities faced by the poor families are insurance products to mitigate the risks associated with life, health, crop and assets.The Poor households are more often exposed to risks, which causes losses that are beyond their means. Insurance cover for the member’s life, health and productive assets can insulate the savings and credit, which are often at the risk at times of emergencies. Risks associated with the livelihoods of the poor households can be mitigated with simple, contextually relevant and affordable social and livelihoods security products.

Income security at the old age of the poor men and women could be achieved thorough micro-pension product, for which they are ready to save for their future. Micro Insurance initiatives have helped reach one million poor families with an annual premium of Rs.40 crore to provide a risk cover to the tune of about Rs. 1200 crores. The micro-pension product is offered by 26 federations benefiting 26,000 women and is spreading and growing.

Connecting the Poor with Banks: Building Business Linkages

With nearly two decades of experience in building linkages between banks and SHGs, DHAN has proved ‘banking with poor is a viable business proposition’. DHAN has been a pioneer in shaping the SHG-Bank linkage. What was started as a small experiment in early nineties has transformed into nationwide movement today. Mutually trustworthy relationships between these groups and banks reinforce long-term sustainable business partnership. The concept of continuous cash credit to SHGs, which was experimented by DHAN once, has gained national recognition and being implemented. The Kalanjiam Federations have brought the advantage of scale to the banks with a large clientele base in rural areas and made many branches vibrant and profitable.

The Kalanjiam Groups have been successful in establishing and nurturing viable and sustainable business linkages with 322 branches of 36 commercial banks and Regional Rural Banks. Annual credit turnover of Kalanjiams through Bank-linkage have reached a robust level of Rs. 300 crores.

Building Sustainable Peoples’Organisations: Mutuality Matters

The principle of cooperation and mutuality has been bedrock for the Kalanjiam SHGs and their Federations. Kalanjiam Community Banking Institutions promoted by DHAN is achieving sustainability in social, financial and technological aspects are its hallmark. The SHGs start meeting their costs of operation from day–one, which builds their confidence and capacity to manage both financial and human resources on their own. By making decisions, monitoring their own progress, and solving conflicts, people acquire a sense of solidarity, as well as competence to govern their institutions.

Contribution of the poor women to meet all the running cost of their institutions, which makes their institutions financially self-reliant, stood at Rs. 67 crores.

Enhancing Livelihoods: Better Quality of Life

Kalanjiams work for enhancing livelihoods by addressing four distinct needs such as availability, accessibility, appropriateness and affordability of financial resources. Community banking institutions play a vital role in creating and strengthening the livelihoods of the poor by providing timely credit to initiate a new livelihood activity, including adequate working capital, access and control over productive assets, be able to upgrade existing assets, make investment in new assets, diversify into new activities. People have graduated from the state of survival and subsistence to self-employed and enterprises. Three distinct livelihood models in Kalanjiam eco-system are 1. Access to credit or markets or technologies or skill building; 2. Aggregation and collective marketing, 3. Value addition through processing.

Community banking has facilitated about two lakhs families to ‘Move out of Poverty’. This is declared by the people themselves.

Enabling Institution Building

Participation with ownership is the cornerstone of Kalanjiams Institutions with the enabling processes by DHAN. The decision making processes and methods of Community Banking Institutions enable direct form of democracy. It involves meaningful dialogue, debate, and discussions in an effort to solve the problems that arise in their groups and networks. Institutional processes like Annual General Body meetings and Mahasabhas, multi-level forums for governance, robust accounting and management information tools and methods, auditing and disclosure of accounts at all levels, goal setting and future–search mechanisms help nurture transparency and accountability, which in turn strengthen democratic processes.

Community Governance: Building Leadership

Beyond economic aspects, the Community Banking Institutions have provided ample space for the women to gain confidence and courage to face unfamiliar environments and travel outside their villages and slums. They work with the government and the banking system. They participate in cooperative decision making and are adept at conflict resolution. The poor women, who have gained financial strength, have started playing an active role in decision making within their families and have gained visibility and respect both within and outside their families. Kalanjiam SHGs and their Federations have provided opportunities for everyone to take-up leadership responsibilities and create enabling environment to help them unleash their leadership potential. Leadership rotation and graduation mechanisms facilitate expansion of leadership opportunities in their institutions.

The Community Banking initiative has created leadership space for over 1,50,000 poor women, who are currently holding various leadership positions, starting from the primary groups at village level to the Kalanjiam movement at the national level. An equal number of leaders have occupied leadership positions in the past in these organisations, and they continue to guide the present leaders, thus unleashing the power of three lakh leaders from the grassroots.

Empowering Women

The process of empowerment in Kalanjiams has three dimensional impact of financial, economic and social inclusion. When women gain control over financial and livelihood resources, they gain visibility and have their ‘say’ over things affecting them within their family and the society. Their active role in household economy increased their physical mobility as they attend skill building training programmes, business related and regular group meetings, and make frequent visits to and interface with banks, local and distant markets, and nearby villages and districts sometimes to other states. The social network and interaction processes brings them recognition andcreates space in the community decision making, which lead to increase in their confidence level and self-esteem.

The impact of empowering processes finds expression in the way the leaders manage and govern their institutions.

Transforming into Civic Institutions

True to its principle and philosophy Kalanjiams have emerged as development institutions addressing civic development needs of the people at large. They expand beyond their institutions and start focusing on larger community needs, pertaining to their quality of life, which offer them a unique space in the society such as housing, sanitation, and access to electricity, education for their children and healthcare for the family. Anemia control programme designed and implemented by DHAN for more than a decade along with the Federations has been recognised as a replicable model by the National Rural Health Mission.

The Kalanjiam Reproductive and Child Health Programme designed by DHAN is implemented by more than 100 Federations benefiting over 250,000 women, adolescent girls and children. The Kalanjiams in Madurai, Theni and Salem in Tamil Nadu and Vishakhapatnam in Andhra Pradesh have established community-managed speciality hospitals that together serve about one lakh members’ families with the backup of health insurance.

Looking to the Inclusive Future

What began as a pilot project in 1990, the concept of Community Banking has transformed into a nationwide ‘SHG Movement’ today with its reach and larger development impact. Poverty reduction is still an unfinished agenda of this Movement. With the growing complexities and new form of challenges for tackling the issues of poverty, the institutions working to address these issues need to be suitably capable. It throws a lot more challenges to the Community Banking theme of DHAN. It is well poised to emerge as a full-fledged COMMUNITY OWNED BANK and MUTUAL INSURANCE ENTITY, which could address the financial inclusion of the unreachedcommunities. No doubt, the Kalanjiam Movement would continue to spearhead the fight against social evils such as alcoholism, gender discrimination and exploitation in any form. The Kalanjiam Movement will strive towards inclusive future of financial, economic and social inclusion, which addresses the global problem of inequality.