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Sri Lanka field visit

17 Feb

This is a post by Gautam Rege of Josh Software.  Gautam Rege and Sethu Ashokan are the co-founders of Josh Software in Pune, India.  Josh Software is one of the experts in building software with Ruby on Rails. They have graciously agreed to support the ongoing development of the United Prosperity website on a pro bono basis. They also volunteered to do a field visit to Sri Lanka to see how their contribution is directly impacting people’s lives.  They no doubt live up to their company’s name Josh that stands for enthusiasm and passion in Hindi. The post by Gautam Rege follows.


_______________Blog post on Sri Lanka visit by Gautam Rege _________________

In the first week of February, Sethu and I were on a field visit to Sri Lanka that was organized by Berendina Micro Finance Institution (BMI) and UnitedProsperity. Little did we know what’s in store for us but we have come back home changed and inspired.

The visit agenda was to study the impact of the micro loans that Berendina provides to their customers and to see its impact. UnitedProsperity has been involved in providing the micro guarantees for these loans.

We arrived at Dickoya branch near Nuwara Eliya in the morning. A 4-wheel drive was required to scale treacherous uphill and winding roads. This branch services about 4000 micro-loans and is managed by just 6 Microfinance officers. After a brief presentation on what they do, we set off to meet the people who have been helped by these loans. The clientele varied from a house-wife whose has stared a business of incense sticks, to a person who has setup a shop, to a person who has purchased a cow for this small dairy and even a plantation worker who has built his own toilet! This post later contains some photos and videos about these people and the loan impact. What I shall talk about here is how this impacted us and what I felt was wonderful about this entire setup.

Berendina has been around for more than 25 years and their meticulous approach to doing good as a non-profit is seen in their actions. They have an innovative way of providing loans.

  • 3 beneficiaries form a group
  • 10 groups form a cluster
  • 30 clusters are managed by 1 branch officer.

This way 1 branch officer manages about 900 customers! There are regular cluster meetings where the money is recovered on a monthly basis and the group is responsible for their re-payment. This encourages the group to work together and support each other, even on repayment. In some cases to ease the process, BMI also gives loans to co-operative society as a bulk loan.

But Berendina doesn’t just stop there – they also have a Berendina Development Services (BDS) that is targeted only for improving the quality of life. One of the innovative approaches is about giving coupons for training camps – “Livelihood training”, “Entrepreneur accounts management” etc. These coupons are part of the loan and can be redeemed for training or they can get the cash value back in the case of unused coupons. This enables people to not just avail loans but also get some vocational guidance, education and knowledge. To my knowledge very few microfinance institutions anywhere in the world have implemented such a program.

The plantation worker story is an awe-inspiring one. BMI is the only Microfinance institution that supports plantation works whole-heartedly. Plantation workers are those who have been working for all their lives in tea plantations and are considered very high-risk customers for repayment. Their living conditions have traditionally been very poor. BMI strives to improve their quality of life by providing toilet loans, health camps, eye-checkups and even cataract operations all free of charge as part of their BDS initiatives.

Lets meet some of their customers:

Here are some memorable photos:

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The Berendina office, which houses Kishore, the Branch Manager and his 6 Branch Officers.

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Parthiban – the Hero of the day. He has received the entrepreneur award from Berendina.

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The old and the new hygienic changes that Berendina is bringing about. The plantation workers earlier had common open toilets as opposed to the new private clean toilets.

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The Happy Shopkeepers – Srikumaran and Bhuvaneshwari – their lives have changes after the loans they got from Berendina.

We also interviewed several clients and here is video of our interviews: Berendina visit video

We were also highly impressed by the transparency, dedication and commitment of the Berendina team. Travelling with them through the long day in a tough terrain, we were amazed to see that their energy level never flagged and they seemed to be going on an on like an energizer bunny.  This visit has energized us even more to do our bit to ending poverty.

Visiting our next partner in Kutch – Day 2

28 Oct

On the second day of my visit to Prayas, our next MFI partner in the state of Gujarat, I went to Gandhidham, which showed signs of most modern Indian cities with its large buildings, the latest cars on the road and so on.

I learnt that Gandhidham and other parts of the Kutch area also had a high level of HIV/AIDS. There were several reasons for this – a nearby sea port, transportation hub, a significant migrant population who work in the nearby export processing zones and industrial centers that did not have their families with them, and also acute poverty and lack of livelihood opportunities.

Prayas is also involved in the prevention of HIV/AIDS and works closely with the gay community and also female sex workers (FSWs) who are considered high risk groups. Prayas has 3 gay employees who reach out to the gay population many of whom are married and educate them about taking the necessary precautions. Many of them also have STD or AIDs as a result of which they incur high medical expenditures. Their families thus tend to be lot poorer. For their economic development, Prayas consciously forms groups in the areas where they live so that their spouses can take microloans and earn their livselihoods.

As I learned a little bit more, I also realized that were hardly any financing options for the poor available in Kutch. Other than Prayas no microfinance institutions operates there and most people have to approach a local money lender in case they need a loan. The money lender terms I found were the most usurious with interest rates in excess of 700%.

Thus, poor families facing financial shock or hardship for example during a health emergency, have very limited options. What I learned is that several women have had no choice but to become a FSW to get some money to treat a sick child or sick husband. Prayas is in contact with more than 800 FSWs. Apart from education, Prayas also works for their socio-economic development by helping them gain livelihood opportunities by giving them microloans.

I also visited some of the entrepreneurs and their families in Gandhidham. I found many of them living in worse conditions than what I had encountered in Jharkhand and Bihar when I visited Ajiwika. In case of some of the families, the rain water was entering their houses and some families were not even sending their children to school. This was a big shock to me.

Gujarat has been growing at very high GDP growth rates since 1991 (possibly greater than 10% per annum) and I did not expect to see this level of poverty. This perhaps tells us that while top down development strategies like big infrastructure projects, massive roads, big industry projects are useful and beneficial; their benefits may not necessarily reach the poorest families who continue to be trapped in the vicious cycle of extreme poverty. While bottom up development is not flashy; there are no big buildings, bridges, massive roads or monuments to show, I think it is a sure way to make a difference to the lives of the poorest families and help them come out of poverty with dignity.

Usurious Money lending in Kutch, India

4 Oct

While in Kutch I also learnt about the money lenders who operate there. The town of Anjar has around 150,000 people and has more than 40 money lenders. I was told that each of these money lenders has a loan portfolio of around $60,000. There seem to be two types of loan products available – the first is a 100 day daily repayment product and the second is a ‘Meter’ product. The first choice for a borrower is always the 100 day daily repayment product.

The daily repayment product is offered by a local money-lender who is often called a Bapu or Jadeja. To get a loan from a money lender a borrower has to find an agent or ‘Jhamin’. The agent takes the borrower to the money lender who makes the loan, but loans are rarely made to women.

If the money-lender makes a loan of Rs. 5,000 (approximately USD 111) to the borrower, then the borrower needs to make the ‘interest’ payment upfront. For Rs. 5,000, the upfront interest is around Rs. 800 (16%). The agent also collects his fee of Rs. 300 (6%) upfront. Thus the borrower gets Rs. 3,900 in hand.

Now the borrower has to make 100 daily installments of Rs. 50 (1% of loan amount) each. The annualized interest comes to 736% using the calculator here: In case the borrower is unable to pay for 3 consecutive days, then the borrower has to pay Rs. 50 in penalty.

The local money lenders have also developed standard techniques of collection. In Anjar, if the loan is overdue for more than 7 days, then the agent (Jhamin) will visit the borrower and ask the borrower to pay the overdue amount. On the 10th day, the Jhamin will come and take the borrower to the money lender’s office. Very few borrowers ever want to go the money lender’s office on the 10th day. Some money lenders I learnt adopt strong-arm collection techniques. As soon as the borrower enters the money lender’s office, he is first assaulted by one of the men sitting in the money-lender’s office. Only then is the borrower asked why he is unable to repay the loan.

After the 10th day very few borrowers can endure the stress. If the borrower is seen around then some of the money lender’s men abuse the borrower in public. The borrower now has only two choices – he can refinance the loan through another money lender or simply leave the city. Every year one or two borrowers also commit suicide.

If he chooses the refinance option, then he has to go to another money lender who offers the Meter product. In Anjar this type of money lender is called ‘Sheikh Dada’. For the Meter product, there are often minimum loan amounts. The money lender for the Meter product may also insist on collateral. On the Meter product the borrower has to make a monthly interest repayment of 15-20% of the loan amount (e.g. if the borrower borrows Rs. 10,000 then the repayment is Rs. 1,500 to Rs. 2,000 every month) and the principal of Rs. 10,000 cannot be paid in partial payments, Thus, the borrower is forever trapped in a cycle of poverty, repaying the money lender till he is able to accumulate the Rs. 10,000 needed to pay off the principal.

In the nearby town of Gandhidham, the lending terms were even harsher. Gandhidham has an estimated population of 300,000 but has only 15 money lenders. Thus there is much more demand for money lending as there are very few alternative finance channels. Thus with limited or no competition, the money lender makes the loan product even more stringent. Thus, on the daily repayment product in Gandhidham, a penalty is charged even for a delay of one day. In case of the Meter product, the repayments are higher and are on a daily basis. Thus on a Rs. 10,000 loan through a Meter product, the daily repayment is Rs. 100.

The money lender interest rates we see in Kutch seem to be higher than in other parts of India. In both these towns Prayas is the only major microfinance institution working. Competition from microfinance institutions and other financial institutions will eventually bring down the money lender interest rate. But one thing obvious, in the absence of microfinance and other formal financial institutions lending to the poor it is almost impossible for the poor to escape from poverty.

Visiting Our Next Partner in Kutch, India – Day 1

17 Sep

While I was in India, I visited Prayas, a microfinance institution (MFI) in Kutch located in the state of Gujarat in Western India. Gujarat has been recording some of the highest economic growth rates in India over the past two decades.

We are planning to sign up Prayas as the second microfinance partner. Prayas has built a fine reputation for its work and what caught my initial attention was that the Chairperson of their Board of Trustees is Ms. Jayshree Vyas who is the Managing Director of the famous Sewa Bank. Prayas was started by Bhadresh Rawal and Dilip Dave in 1997 with a focus on social empowerment of people. Their initial work was for Natural Resources Management – sun, water, vegetation and land as well as human rights and health awareness. Soon they realized that people wanted economic empowerment in a sustainable manner that is independent of the vagaries of the grant cycles of the government or funding agencies. So they added microfinance to their roster of activities in 2006. Since then they have lent to over 7000 borrowers and have also established relationships with 7 banks and development institutions.

I was aware that Kutch is one of the poorest parts of Gujarat and is prone to natural disasters, such as the devastating earthquake in 2001 that left more than 12,000 people dead. But on my flight to Kandla from Mumbai, I still carried a nagging doubt at the back of mind whether we should support a MFI in Gujarat rather than one in a poorer state, where the entrepreneurs may need our more immediate attention. However, my doubts vanished when I visited Prayas and the entrepreneurs they support.

I reached Kandla the morning of the 3rd September and soon I was at the office of Prayas in the town of Anjar. I met Bhadresh Rawal and his team and in the afternoon we visited some of Prayas’s borrowers. First we met Sakina Ben and Qasim. Sakina Ben has a small shop in her neighborhood where she sells produce, cookies, home-made snacks and other stuff. Her husband Qasim is a daily wage earner who finds work on a daily basis with various contractors. Sakina Ben was thankful for the availability of microloans. She had already borrowed four times from Prayas and she was very happy for the difference it was making to her life, but thought that things would be much better if she could get a larger loan. What struck me was the amount of work she was putting everyday, 365 days a year. Here is her schedule:

4:00 AM: Wake up. Make snacks to be sold in the shop. Cook food. Qasim goes to the market to get produce He also helps with filling water and the cooking.

6:30 AM: Breakfast

7:00 AM: Qasim leaves to find work, Sakina Ben goes to the shop.

7:00 AM to 1:00 PM: In the shop.

1:00 PM to 3:00 PM: Lunch, cleaning and wash clothes.

3:00 PM to 9:00 PM: In the shop

9:00 PM to 10:00 PM: Make dinner

10:00 PM to 11:00 PM: Have dinner and sleep

As we were talking with her, we were joined by one more lady, also called Sakina Ben. Sakina had also taken a microloan from Prayas. She has four children – three girls and one boy. She was very proud of her progress: “I have everything – a house, a TV, a DVD. Me and my husband cannot read and write, but we are determined to educate our children. My son goes to a private school while my daughters go to a government school”.

Earlier she used to work as contract labor in a large textile factory. She would get paid Rs. 200 (USD 4.50) per day for eight hours work. Of the Rs. 200 she used to pay Rs. 10 for transportation and Rs. 20 to the labor contractor. The working conditions were tough. Apart from the 9 hours she spent at work, she had to walk one hour to reach her work unit in the factory premises (there was no internal transport from the factory gate to her work unit) and that left her with no time to take care of her children. As a result her eldest daughter stopped going to school to stay at home and take care of her siblings. But soon Sakina Ben realized that contract labor was going to earn her between Rs. 4000 and Rs. 5000 a month but will not necessarily make her and her family better off.

She then courageously quit her job and took a microloan from Prayas. She bought a cow with the microloan and also started doing embroidery at home. She now earns Rs. 4500 per month (USD 100) from her dairy and embroidery businesses. Her eldest daughter went back to school and Sakina Ben is able to give much more attention to her children.

But such heroic stories have their poignant moments as well. One of her daughters lost three grades at school when they moved her from one school to another. The new school should have enrolled her in the 4th grade but they enrolled her in the 1st grade instead. It took three years for Sakina Ben to realize that her daughter had been enrolled in the wrong grade. I was aghast. “How could you let this happen?” I asked. “What could I do” said Sakina Ben, “we do not know to read and write and the child did not tell us anything”.

Their resolve and the odds both the ladies had to overcome left a lasting impression. I realized that they need our help. I wanted to know more and was looking forward to the next day’s visit.

To be continued….

Creating a shared prosperity

9 Feb

Last month we visited Ajiwika, our first partner microfinance institution based out of Jharkhand, India. We were very keen to meet some of the entrepreneurs from Ajiwika. We were joined by Tanay Chakravarty, the CEO of Ajiwika and some of his staff.

Our first visit was to Chakri Pahar which is around 10 miles from Deoghar where Ajiwika’s main office is located. We were greeted by several entrepreneurs and their families including Barki Devi and group, and Bandana Devi and group. Many of the entrepreneurs belonged to the Santhal tribe and we received a traditional Santhal welcome where they offer a pot of water with flowers to their guests, which was a wonderful experience. Shortly thereafter we started talking to the entrepreneurs on how the microloans had helped them – Barki Devi bought a bullock with the loan, Bandana Devi increased the inventory in her shop, Juba Hembram and a few others bought a cow.

Most of the stories showed signs of incremental progress, but we were impressed how Shaila Devi and her husband Naresh Murmu had quickly grown their business of making ventilators for houses. Naresh Murmu had been working as a mason for sixteen years. He had the skills but he did not have the money to start his own business. On getting the microloan, he started his business and now he has also employed two other people.

We were also delighted to learn that all the children in the neighborhood were going to school. In some cases, some families who were now enjoying a higher income after taking the microloan were enrolling their children in private schools instead of the government run schools which offer free education. While most of the women could only sign their name but could not read and write, their determination to make sure that their children have a good education was truly noteworthy.

As we were about to leave, Barki Devi sang a Santhal song to mark the occasion. The song was about coming together to create a shared prosperity for everyone. The experience was truly overwhelming and I still cannot fathom how she could choose a song so apt and profound on that occasion.

We visited more entrepreneurs at Nilkothi. Nilkothi is in the neighboring state of Bihar, which has recently experienced very good economic growth. The entrepreneurs here including Shanti Devi, Savitri Devi and other members were mainly involved in agriculture. All the entrepreneurs were highly appreciative of the fact that the microloans are disbursed quickly at their door step. They were excited to see pictures of guarantors coming from all over the world to support them.

We also visited Ajiwika’s branch offices and their head office. The branch offices are very functional and consist of two rooms with a kitchen and an attached bath. One of the rooms serves as an office and has a computer, two desks, a few chairs, a cupboard and a white board for keeping a scorecard of the loans. The staff involved in running the branch sleeps in the office at night.

The impact of the guarantee on Ajiwika has been remarkable. Six months back most of the smaller microfinance institutions like Ajiwika were struggling to raise funds because of the financial crisis. While development lenders such as FWWB and SIDBI were making some loans to smaller microfinance institutions, most of the banks had become extremely conservative in their lending. Banks often tend to work in an informal syndicate. If one bank lends then other banks are more inclined to follow. The converse also holds true, if the more development oriented banks become conservative, then the rest of the banks follow suit.’s guarantee enabled one bank to lend to Ajiwika. Now that a mainstream bank was lending to Ajiwika, over the next six months several other banks have approved loans to Ajiwika.

The guarantee has had a catalytic effect. Not only did we directly support the entrepreneurs on our website, but we also provided the spark for freeing up funds locked with other banks to support many more entrepreneurs who are not listed on our website.

Barki Devi’s song of coming together to create a shared prosperity is apt indeed!!