"When Banks turn the other way: How do the poor manage?"
Probably the most significant of all informal credit market initiatives is that of a community organizing itself into a group and generating finance at the community level. There is a wide range of such initiatives ranging from, for example, a small informal group of women who help each other in times of financial need, to that of registered community level societies that offer savings and credit services to its members, and are linked with external groups such as NGOs and commercial banks.
The significance of such community financial activity has to
be understood from the larger perspective of solidarity and community development: of low-income groups being able to help each other; of resource generated by the group and for the
group; of community organization, leadership identification and training, education and skill
development and other related issues.
Of particular importance is the involvement of the whole
community in collective decision making in matters that directly affect them.
Literature Review of Community Groups
|Other names for
Organizations, Self-Help Groups,
- - The group provides an opportunity for
its members to save, however small an
amount, and in intervals suited to them: daily,
weekly or monthly.
- - Returns on such saved amounts are sometimes
better than those available from other formal
- - Savings in some cases is compulsory, where
loans are given as a multiple of the saved
amount, encouraging thrift among the
- - Small loans for short periods are available on
terms and conditions that are acceptable by the
borrowers (which are also decided by them).
- - The terms and conditions of such loans are
usually flexible, allowing for unforseen delays
- - The process of decision-making within the
groups is democratic and is arrived at
by consensus and agreement. This means that
all benefits from any activity is equally shared
by all members
- - Leaders of such groups are usually
identified through a process of extensive
community participation and meetings.
- Community organization-
- - The decisions and smooth functioning of all
activities are carried out by leaders and
community volunteers who are, in many cases,
trained by NGOs and other external agencies.
This increases the efficiency and yield of such
- - The participatory approach that is adopted by
community groups is a useful experience
that can be adopted to various other fields
such as education, health etc.
- Trust and confidence building -
- - Bringing the community together for savings
and credit activity also increases the process of
community networking and sharing of
- - The united' front put forth by such
organizations and its members builds trust and
confidence in external agencies: for e.g., the
government and banks.
- - Trust and confidence building also ensures
that the resources generated lead to overall
economic development of its members and the
community as a whole.
- Limited internal resources -
- - The amount of financial resources that
communities can mobilize on their own is quite
limited. Most overcome such shortcomings by
networking with NGOs, banks and other
- Vested interests -
- - Despite consensus and collective decision-making processes, community groups are
sometimes plagued by vested interests and
other unscrupulous persons.
development of a Community Groups||
The growth and development of a Community Group is usually done in four stages -
- Formation -
- - Identifying residents and leaders through
- - Evolving group norms and bylaws, electing
leaders, training, awareness building
- - Regularizing group meeting schedules
- - Decisions on the mode and method of savings
and loan activities
- - Pooling of savings, issue and collection of
- Stabilization -
- - Leadership development and stabilization
- - Handling of group level transactions from
- - Cluster/community interaction activities
- - Initiation of related income-generating
- - Linkages with banks, cluster ROSCAs etc.
- Growth -
- - Establishing extended links with banks and
individual loans to members.
- - Increased community development
- Expansion -
- - Expansion of assets at the group level for
- - Increased linkages with other communities,
networks at the regional, national and
Types of Community Groups||
- Community groups
- Women's groups
- Youth groups
- Political groups
- Special-interest groups
- Groups aligned along ethnic and other minority
formation of Community Groups|
In general, attributes of homogeneity in the
community help in group formation and cohesion,
ensuring commitment and participation; attributes
of heterogeneity enhances the functioning of the
groups itself by providing mutual insurance
capacity and strong leadership, transparency in the
savings and credit activity.
- Size and physical limits of the community
- Ethnicity - religion, language, place of origin
- Socio-economic profile - age-groups, income
levels, place and type of employment,
investment in housing and infrastructure,
tenure, civil status etc.
|Key Implications of Community Groups||
- Need for strong community groups with trusted and trained leaders and other
- Need for both savings and credit activities for generating local resources as well as
confidence building for participation of external institutions such as banks.
- Need for NGOs and other external developmental agencies for training and
mobilization of both members and leaders.
- Linking savings and credit activities with other development programmes that
enhance participation and solidarity building within the community.
- Participation in other community networks for sharing of experiences and ideas so as
to enhance efficiency and overall economic development of its members.