PUTTING THE MICRO BACK IN MICROFINANCE: A CASE STUDY OF TWO NGOS IN INDIA

A Thesis Submitted in Partial Fulfillment of the Requirements for the Degrees of Master of Arts/ Master of Science in International Public Service Administration

June 2005

By Radha G. Friedman

Departments of International Studies and Public Service Administration College of Liberal Arts and Sciences DePaul University Chicago, Illinois

TABLE OF CONTENTS i. ii. iii. 1. 2. Acknowledgements....................................................................................................iii List of Abbreviations .................................................................................................v List of Illustrations.....................................................................................................vi Introduction.................................................................................................................2 The Research Problem: What Effect Do Donor-Driven Best Practices Have On Microfinance Institutions in India? ............................................7 The Literature on Microfinance: Competing Paradigms ...........................................17 3.1. The Microfinance Schism And The Souls Of Poor Folks ..................................19 3.2. The Importance Of Empowerment And Microfinance.......................................37 3.3. Womens Participation In Development.............................................................44 3.4. The Long And Winding Road: Where We Are Now .........................................53 4. Research Design and Findings: A Case Study of Two MFIs in India .......................56 4.1. Methodology and Instrument Design .................................................................56 4.2. The Findings .......................................................................................................62 4.3. Case Study 1: Prem Sangam ...............................................................................64 4.4. Case Study 2: Jaya Sangam ................................................................................76 5. Analysis & Conclusion ..............................................................................................87 5.1. Hypothesis or Design? ......................................................................................88 5.2. Conclusions........................................................................................................101 6. 7. Bibliography ..............................................................................................................105 Appendixes ................................................................................................................160 A. Survey Instrument................................................................................................160 B. Questionnaire of Prem Sangam ...........................................................................163 C. Questionnaire of Jaya Sangam.............................................................................174 ii

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ACKNOWLEDGEMENTS This thesis would not have been possible without the assistance and support of a number of individuals and organizations. Before I thank these individuals, however, I would like to pay tribute to the many individuals involved in this study who were affected by the tsunami that devastated much of South and Southeast Asia. On December 26, 2004, as I was finishing this thesis, an earthquake off the coast of Indonesia sent waves rippling through the Indian Ocean so forcefully that over 150,000 people were killed in several countries and the earths rotation was literally thrown off kilt. Among the hardest hit areas in India were Yellamanchilli, on the eastern coast of Andhra Pradesh, and Chennai, on the eastern coast of Tamil Nadu, where my case studies took place. This colossal disaster struck me very personally. In addition to the many kind individuals whom I met while conducting my research, my mother was also flooded by the tsunami in Kerala. I spent a week not knowing what happened to her, until she was able to get to a working phone line and let me know she was alive and safe. I still have not been able to reach the individuals involved in this study, and looking at the very places where I stood just a year ago, it is almost unbelievable that they are indeed the same places. Gone are the fishing boats and the livelihoods of the fishing communities that line the beaches. Gone are thousands of homes and businesses. The abysmal poverty rate in many of these areas has just increased exponentially, making the significance of this study all the more important. I am profoundly grateful to every person I had the privilege of meeting at both organizations, although for confidentiality reasons, their real names cannot be written here. I am deeply grateful to the members of Prem Sangam and Jaya Sangam, to Jaya Singh and Prem Patel and for taking the time to meet with me, and to the members of Prem Patels family for being such gracious hosts. I hope they are all safe. I am also grateful for the guidance and support of my thesis advisor, Dr. Shailja Sharma, who constantly reminded me that this study was my chance to make my voice heard, and that my opinions need not be the same as anyone elses. Her intellectual guidance and friendship throughout the program were invaluable. I am grateful as well to Dr. Michael McIntyre, who demanded excellence from even

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before day one, and whose wit made even the most dry and unintelligible theory enjoyable. I also wish to thank the many professors in the Public Services Graduate Program whose support was deeply appreciated. I thank Dr. Sara Gooding-Williams, who gave me unending inspiration, a toolkit of strategies for public policy assessment, and who was an outstanding mentorthere is a reason she won that award for teaching at Harvard. I thank Dr. Ron Fernandes, who was always keen to debate with me the varying paradigms of development theory and their implications for India. I thank Dr. Gloria Simo, who taught me to overcome my fear of math and never let me leave her office without laughing. I thank Dr. Pat Murphy for his financial support and for always having chocolate in his office. Last but not least, I thank Dr. Marco Tavanti, who led me through the jungles of Zapatista communities and the mountains of Chiapas to meet some of the most remarkable people in the world, and who opened my eyes to the parallels between the struggles of indigenous communities in Mexico and India. Finally, I am deeply indebted to my friends and family. To my brother, father, and mother who have always encouraged and supported me despite the fact they cannot remember the title of my degree; to my friends who accepted that I dropped off the face of the earth for two years while I worked full-time and went to school full time at night; and especially to Cree Morning Star, Mariella, and Kissa for their unconditional sisterhood and support. Most importantly, I am grateful to Josh, who helped me survive every torturous research paper, who traveled with me to the most remote villages in India where he was forced to eat his weight in rice, and who was with me every step of the journey. I could not have done it without you all.

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LIST OF ABBREVIATIONS CGAP DRDA GAD GoI GRO IFC IMF INGO IRDP LDC LPC MFI MIX MNC NABARD NGO NIC PAR PRA RRA SAP SEWA SHG SIDBI SME USAID WID Consultative Group to Assist the Poorest District Rural Development Agency Gender And Development Government of India Grassroots Organization International Finance Corporation International Monetary Fund International Non-Governmental Organization Integrated Rural Development Program Lesser Developed Countries Local Policy Culture Microfinance Institution Microfinance Information Exchange Multinational Corporation National Bank for Agriculture and Rural Development Non-Governmental Organization Newly Industrialized Countries Participatory Action Research Participatory Rural Appraisal Rapid Rural Appraisal Structural Adjustment Program Self-Employed Womens Association Self-Help Group Small Industries Development Bank of India Small and Micro-Enterprise United States Agency for International Development Women in Development

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LIST OF ILLUSTRATIONS

Figure

Page

1. Personal Income Inequality Trends in India..17 2. Map of India.....104

CHAPTER 1 INTRODUCTION

In the past decade, microfinance has become a household word. On my way to work one morning in April, I picked up the New York Times to see that microfinance had made the front page.1 On October 11, 2004, United Nations Secretary Kofi Annan called microfinance one of the success stories of the past decade (UN News Center, October 11, 2004). As of December 31, 2003, the Microcredit Summit, in collaboration with over 3,000 development institutions from 137 countries, reported that microfinance institutions have reached as many as 80,868,343 clients globally (State of the Microcredit Campaign Report, 2004). Even Starbucks, the beacon of Western pop culture, has announced its one million dollar investment to support microfinance programs for coffee farmers in Latin American. Yet for all of the sensationalized stories that hail microfinance as a panacea to poverty2, few speak of the rumbling controversies within the

The April 29, 2004 article, Debate Stirs Over Tiny Loans To Worlds Poorest, received a slew of letters to the editor from the microfinance community. 2 A note on terminology: There are many definitions of poverty and how it should be measured. Many economists define this by separating those living above and below the poverty line as poor and non-poor. The category of poor are further divided into destitute (the bottom 10% below the poverty-line), extreme poor (the bottom 10 to 50 percentile below the poverty line), and moderate poor (the top 50% below the poverty line). For the purposes of this thesis, I will focus on those people living below half the national poverty line or living on less than US $1 per day. This group is defined by the Microcredit Summit as the poorest of the poor and by the Consultative Group to Assist the Poorest (CGAP) as very poor.

microfinance sector, or of the disasters of international aid that precipitated its presence.

Looking back on nearly sixty years of organized international development efforts, it is apparent that the conventional approaches prescribed to help backwards countries catch up with the industrialized world have only deepened the poverty and inequities of those hit hardest, particularly poor women. The numbers of poor women in whose name international development has been justified are now greater than when these development efforts began, leading to the global phenomenon that has become known as the feminization of poverty.
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In India, the feminization of poverty has been exacerbated by multifarious interrelated causal factors, both endogenous and exogenous. The most salient among the myriad endogenous factors are the stratification of Indian society, unequal opportunities for education, and cultural and religious norms, but equally important are exogenous factors such as state and international economic institutions, and development programs designed outside of India. These structures have kept women living in poverty by ignoring womens multiple roles
The term "feminization of poverty" was first coined in 1978 when Diana Pearce, a visiting researcher at the University of Wisconsin, published a paper noting that poverty was becoming "feminized" in the United States and that two-thirds of the poor over the age of 16 were women. Since then, the term has been applied to describe this phenomenon in many developing countries.
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in Indian society and thus, how development initiatives may affect them differently. If the causes of poverty are seen not only from an economic perspective but also from this socio-cultural perspective, it can be understood that the burden of poverty in India falls most heavily on women, particularly women at the lower end of the social stratification already, such as dalits (untouchables) and adivasis (tribal villagers).

Indian women are virtually excluded on every count from the decision-making processes which would permit them to lift themselves out of poverty, a byproduct of the rigidity of socially ascribed gender roles and women's limited access to education, training and resources. Therefore, gender issues are intrinsically linked to the causes of poverty, the toll that poverty exacts on women's lives, and also to strategies for poverty reduction. Indian womens disproportionate poverty is reinforced primarily by 1) neo-liberal capitalist development institutions4; 2) patriarchal institutions of the Indian state; 3) Indias stratified social system (or caste system); and 4) cultural bias. These systems feed and reinforce one another in order to maintain the subjugation, social devaluation, economic marginalization, and invisibility of women in India. These bifurcated socio-structural constraints of what Samir Amin describes as uneven
Development Institutions refers to multilateral agencies such as the World Bank and its microfinance arm, the Consultative Group to Assist the Poorest (CGAP), as well as bilateral agencies such as USAID and Britains Overseas Development Administrationagencies financed involuntarily by taxpayers who have little if any say how their money is spent.
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development have long limited Indian womens participation in the economy and to resources such as land, natural resources, or banking institutions that may allow them to become economically self-sufficient. (Amin 1999, 157) An assessment of the gendercaste overlap suggests that more than fifty years after Indias independence, the economic condition of women continues to be constrained by their caste status (Deshpande 2002, 3).

Much of this uneven development stems from the roots of the post-colonial construct of international development, a privileged field which viewed development through a paternalistic lens colored by a hegemonic perspective. From this vantage point came a distinct blind spot in terms of consideration of how resources are distributed within a country, and whether the costs and benefits of development affect different parts of the population differently. Thus, the crux of the critique of the Western development movements failure to provide real benefits for women in India rests upon the mistaken assumption that whatever is good for the poor would automatically benefit poor women.

In the mid-1970s, microfinance emerged as a groundbreaking and radical alternative in international development by offering a bottom-up approach of giving small loans directly to the poorest of the poorpredominantly women. Microfinance signaled a departure from the traditional development initiatives

that had dominated developing countries since the Truman administration and relied instead upon a Freireian epistemology bolstered by the idea that the poor were not only bankable, but capable of becoming economically self-sufficient. Microfinance was quickly hailed as a success, sparking a revolution in participatory development and the global womens movement.

CHAPTER 2 THE RESEARCH PROBLEM: WHAT EFFECT DO DONOR-DRIVEN BEST PRACTICES HAVE ON MICROFINANCE INSTITUTIONS?

Since the advent of microfinances first recognized success, the Grameen Bank in Bangladesh, many countries, particularly neighboring India with nearly a third of the poorest population in the world, have witnessed a veritable explosion in microfinance institutions (MFIs). Microfinance has, for all intents and purposes, become a macro phenomenon. MFIs now come in 31 flavors and range in form from non-governmental organizations5 (NGOs), to credit unions, non-banking financial intermediaries, self-help groups (SHGs) or thrifts (sometimes locally referred to as bachat ghats) and even commercial banks. Within these various manifestations, it is the SHG that has come to receive the most replication throughout India, primarily because they can be easily be linked to other NGOs, state banks, or financial intermediaries.

The nomenclature of non-governmental organizations is not a readily tenable one, as it seems to describe what it is not, rather than what it is. There have been various debates about the term, ranging from the more extreme characterization as a manifestation of organizational apartheid reminiscent of the nonwhite label so frequent in racist societies, to the more widely accepted and simple need to differentiate themselves from the government. Their variety and form are too numerous to describe here, but their sheer numbers warrant their inclusion as an important part of civil society and of the microfinance sector in India.

The Grameen model was founded upon the simple principle that poor people, particularly women, are structurally inhibited from improving their economic status because they lack access to formal financial institutions. Banks are typically far away from rural villagers, the majority of Indias poor, require a certain level of education to understand the financial procedures, and necessitate collateral in order to give loans. The Grameen Bank bypassed this bureaucratic route by giving credit directly to the poorest of the poor; women in Bangladesh. The Grameen model has been replicated by thousands of MFIs around the world, and the number of recipients is expected to reach 100 million by the end of 2005 a macro phenomenon indeed (Microcredit Summit, 2001).

A typical sangam (group of women borrowers) within a SHG consists of five to twenty women and is not merely a savings and loan association, but serves as a support group that acts as a guarantor for each others loans6 (Rutherford 2000, 18). The sangam meets regularly (often weekly) for members to contribute savings and make decisions on loans to members of the group, often as little as few rupees. Group leadership is by rotation. The sangam generally lends out of its own pool of funds, however after gaining some experience with lending (and recovering loans), it may borrow from the umbrella SHG for larger lending or group-based endeavors to its members.
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See Fernandez, 1994, for a comprehensive description of SHGs.

The boom of microfinance has been attributed primarily to its ability to easily leverage funding, since MFIs have the potential to simultaneously alleviate poverty and pay for themselves with the interest earned from the loans to the poor. At a time when the Bangladesh Industrial Development Bank held only a paltry 10% recovery rate on its loans, the Grameen Bank boasted a repayment rate of 98%, proving that illiterate, landless and secluded women represented almost no risk if given a well-designed banking structure.

Their appeal may be explained, in part, by attributes not shared amongst all NGOs. SHGs have a comparative advantage for poor and disadvantaged groups because of two salient factors; their accessibility and flexibility. They are often able to provide loans quickly and from within the village or local neighborhood requiring little paperwork and without the bureaucratic mire typical of Indias regulatory systems. In addition, they offer a higher degree of flexibility, in terms of restrictions and collateral, than other financial intermediaries. Informal sources of finance such as these are obviously popular with poor households with few or no assets. Poor women in particular tend to borrow small sums, frequently for domestic consumption purposes, and due to a wealth of endogenous and exogenous societal restraints are less able to access formal lending institutions outside of their local environments.

The explanation for the Government of Indias (GoI) rapid promulgation of MFIs, specifically SHG models, can be explained as a result of several factors, though I will not focus on them in detail as a wealth of literature has already exists to advance these theories. Rather, I will briefly highlight the major relevant factors to provide the context for a richer understanding of Indias current social and economic policies and how they have contributed to the microfinance boom.

In many developing countries, as is true in India, microfinance has been aggressively promoted by large development agencies as the solution to poverty. This has meant, for many donors and governments, a growing pressure to initiate microfinance development projects such as SHGs and to make sufficient financial resources available for them. While driven by good intentions, this rapid propogation of SHGs has led to undesired side effects, such as the design of a rapidly cloneable one-size-fits-all SHG model meant to address the heterogeneous poor in India. To understand why India would readily accept this advice from international development agencies, we must look deeper into the various factors that influence Indias economic and social policy.

Although financial growth and the alleviation of poverty have been stated objectives of government policy in India for many decades, low investment in human development continues to be a significant issue and a constraint. In 2002,

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more of the worlds poor were said to live in India than any other country in the world (Datt and Ravallion 2002, 1). Indias Human Development Index for 1999 was 0.545, resulting in its international ranking of 132nd out of 174 countries (UNDP 1999). Clearly, this reflects some very poor social indicators on whole, such as an average adult literacy rate of just 53.5 percent, to say nothing of the maldistribution of development resources within the country due to the bifurcated segregation of Indian society along gender and caste fault lines (UNDP 1999).

Many economists attribute Indias persistent poverty to the endogenous obstacles of its relatively closed economy, a policy stemming from Indias philosophy of swadeshi or self-reliance after its liberation from British colonial occupation in 1949, something the Indian government only began to reform in the early 1990s. To some extent, Indias economic and social policies reflect the tensions between Gandhis vision of a rural economy and Nehrus vision of a grandiose market economy, a compromise that led to an unusual blend of isolationism and highly controlled foreign investment. The economic crisis of 1991 resulted in a major reorientation of Indias economic policy, and ironically, bolstered critiques from economists who harshly criticized the very neo-liberal reforms international economists had originally recommended. The reform policies essentially involved a 180 degree shift from Indias swadeshi theology in favor of opening up the economy to the rest of the world; by liberalizing trade and finance, privatization,

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accepting foreign investment from multinational corporations (MNCs), and by accepting the Structural Adjustment Policies that accompanied loans from the International Monetary Fund (IMF). In a sense, these changes opened the door for future influence over economic policy, including how India should respond to poverty.

The causal relationship of persistent poverty and Indias economic policies is likely some pied combination of several camps of economic advice, with overlapping actors and structures reinforcing the long-held inequalities. The amalgamation of these factors is evident when observing that the Gini coefficient for India, which measures the aggregate level of income inequality in a country showing 1.0 as complete inequality, stands at 0.327 and continues to rise. (See Table 1)

Table 1: Personal Income Inequality Trends in India Year Gini Coefficient Bottom Quintile Income Share 1980 2000 0.322 0.327 8.5% 8.7% Top Quintile Income Share 40.9% 41.8%

(Bhalla 2002, Table 3.1)

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The abandonment of decades of commitment to economic nationalism since independence has made liberalization and foreign investment an indelible part of India's developmental idiom. Moreover, it has opened the door for foreign investment in MFIs. The bourgeoning marketing of microfinance funding as a low-risk, altruistic investment, coupled with the abundance of poverty in India, has led to an obvious marriage of interests. International donors were and continue to be eager to invest in MFIs, and, fueled by the zeal of the Indian government to exploit their initial success, it is now virtually impossible to find a village in India devoid of the ubiquitous SHG. An estimated 200,000 (2 lakh) exist in India today. It is estimated that microfinance programs will reach at least a third of the rural poor population by the year 2008 through one million SHGs (Singh 2000, 3). The GoIs main poverty alleviation program, the Integrated Rural Development Programme (IRDP), is now the largest program for providing micro-loans to poor people in the world.

Given this rapid growth in the microfinance sector, there has been some debate both within the international development community and within the communities in which these MFIs reside concerning the replication model and the suggested best practices that should be followed to achieve success. The central critique centers on the failure of these replication models to complete the research and design necessary to meet the needs and opportunities of the clients and

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environment in which they operate (Churchill 1997; Dunford 2000). Instead, the SHG blueprints are driven by the needs of the institution, government or donors implementing it without the requisite period of research and reflection, pilottesting, monitoring and modification.

Like popular social movements, the microfinance sector is bound together by agreement on its broad objectives while simultaneously split by rifts on key issues. This thesis does not aim to cover all of these debates, but rather to focus on a question that has not been voiced: How has Indias impetuous rush to clone SHGs through the propagation of a standardized model based on best practices changed or shifted the focus of MFIs in India?

Is it a mistake to assume, as international development institutions have done in the past, that what is good for one microfinance organization will automatically be good in another context? Further, are standardized models relying on the use of these best practices designed and sanctioned by large, international development institutions even an appropriate paradigm to follow, given the massive failure of development institutions in the past? Has the aggressive marketing of these blueprint models and best practice methodologies continued to perpetuate the feminization of poverty in India, and how deeply within the microfinance sector has this influence permeated?

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Thus, I am studying how MFIs that were operating in India before its microfinance boom have been affected by the appropriation of microfinance by international development institutions as the development practice du jour. I hope to elucidate what happens to these organizations, and to the clients they serve, when popular microfinance practices (such as blueprinting and best practices) influence local MFIs to shift their focus and mission and what implications, if any, these shifts may pose for the future of microfinance in India.

It is this researchers hypothesis that within the last decade, large development institutions, such as the World Banks microfinance arm, the Consultative Group to Assist the Poorest (CGAP) and the United State Agency for International development (USAID), have encouraged a paradigm shift in the mission of MFIs from locally adapted activities that promote empowerment and self-sufficiency for extremely poor women previously excluded from development efforts particularly dalits and adivasis to increased financial sustainability and commercialization by outreach to the (lower-risk) moderately poor. Given the complexity and heterogeneity of Indias population, these donor-sponsored best practices will likely affect the microfinance sector differently, yet how deeply will these policies permeate the mission of MFIs, particularly those that have been rooted in the community prior to the microfinance boom, remains to be seen.

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An applied research problem, this question is significant in that it examines the social and structural relationships within international development programs that have kept marginalized women in India from prospering from development, and examines: a) Whether MFIs can continue to be effective in their mission to provide locally tailored opportunities for empowerment and self-sufficiency to the poorest of the poor, or whether influence within the microfinance sector will undercut their internal management and cause a mission drift; b) Whether MFIs can remain accountable to the communities and populations they serve if they do shift their mission in favor of donordriven agendas; and/or c) How deeply the influence of microfinance policy from these development institutions, such as the promulgation of best practices, permeates the microfinance sector in India.

My aim is to elucidate the interplay of relevant forces and factors necessary to better understand the complexity of the development climate within the Indian context, and to draw out the causal explanations that answer the questions stated above.

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CHAPTER 3 THE LITERATURE ON MICROFINANCE

By now, a vast corpus of literature has emerged within the development discourse that disproves that microfinance in and of itself is a panacea to the persistence of global poverty. However, its demonstrated resultsbe they poverty alleviation, empowerment, or expanding womens choiceshave proven microfinance to be a formidable contender for continued practice and/or research in almost every country where it has been attempted. Yet the literature on microfinance provides, at best, mixed results, often with researchers reaching differing conclusions using the same data.

Bangladesh7, the home of the Grameen Bank, has consistently received large inputs of funding for microfinance programs for more than twenty years, yet the results of Bangladeshs microfinance programs remain ambiguous to this day (Kilbyn 2002, 117). In 1998, Khandker found that there had been an increase in household incomes as a direct result microfinance programs (Khandker 1998). However, in another study using Khandkers own data, Morduch found that the

The focus of so many studies on Bangladesh is warranted by the vast critical literature on Bangladesh-based and Grameen-styled microcredit programmes and by the fact that the success of Bangladeshi NGOs such as the Bangladesh Rural Advancement Committee (BRAC) and the Grameen Bank continue to figure prominently in development literature, whether in India or elsewhere.

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income effect was due to mistargeting the microfinance program to a population of only moderately poor women who held less risk (Morduch 1998).

There are several well-known studies that show that microfinance programs are not necessarily empowering for women empowering for women clients, because a) they increase womens burden within the household; b) the women do not control the loans but are instead forced to give them to a male in the household and are still held responsible for them; c) their workloads increase in order to repay the debt; and/or d) there is increased pressure on them from within the families, within the sangam, and from microfinance institution staff.

On the other hand, there are a number of other well-known studies, which found that not only were women and their households better off financially, but that womens consumption patterns indicated increased decision-making (Ashe 2000, Todd 2000, Fisher 2002, Kabeer 2001, Khandker 1998 & 2002, Puhazhendi 1995, Robinson 2002, Simanowitz 2002, Snodgrass, 2002) Likewise, Hashemi and others found that indicators ranging from increased mobility, to financial independence, to empowerment, to political and legal awareness, microfinance had a positive effect (Hashemi 1996, Kabeer 2001, Mayoux 1999). Outcomes such as these have the paradoxical effect of reducing the choices available to

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women rather than enhancing them (Goetz and Gupta 1996, Mayoux 1995, 2001, Rahman 1999).

The disparate conclusions and implications of these studies have been debated within the microfinance sector for years and have grown somewhat stale and polarizing. Although studies attempting to identify whether microfinance is effective or not continue, they always end with the same recommendation; that more research is needed. However, they are significant in that they demonstrate the polarization within the development sector.

SECTION 3.1 The Microfinance Schism and the Souls of Poor Folks Like many social movements, the microfinance sector is bound together by agreement on its broad objectives while simultaneously split by multiple rifts on key issues (Woller, Dunford and Woodward 1999, 29). In 1999, Jonathon Morduch published an article, The Microfinance Schism, that outlined the dimensions of this rift. Morduch proposed that the reason MFIs have spread so rapidly and attracted so much interest from international donors rests upon an enticing proposition; that MFIs that follow the best practices of major

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development institutions (the institutionists8) will also be those that alleviate the most poverty (Morduch 1999, 617).

Morduchs proposition subtly suggests that MFIs operate towards a de facto goal of sustainability, in which they can continue to charge high repayment rates at no cost to governments or donors and hence, ultimately make a profit (Morduch 1999, 618). This vision is, in fact, explicitly laid out in a series of best practices circulated by the Consultative Group to Assist the Poorest (CGAP), a branch of the World Bank, as well as the U.S. Agency for International Development (USAID) and more recently by the Microfinance Information Exchange or The MIX, a partnership between CGAP, the Citigroup Foundation, Deutsche Bank, the Open Society Institute and the Rockdale Foundation. During its first three years, CGAP will manage and provide strategic support to the MIX, who identifies one of its key goals as standardizing microfinance. Yet despite the entrepreneurial lure of this seemingly win-win argument, Morduch remains unconvinced, revealing that nearly all MFIs are unable to attain independent sustainability and remain substantially subsidized, particularly those whose goals are more humanitarian-based (the welfarists) than business oriented (Morduch 2000, 618).

Although Morduchs terms institutionist and welfarist are used here as general categories, neither camp is characterized by complete unity of thought. For the purposes of this paper, these two terms will represent the general associations with each perspective.

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The fulcrum of the institutionist position lies with the financial institution (hence its name) and an MFIs success is measured by its progress toward achieving financial self-sufficiency for the institution, not necessarily for its clients. The emphasis on achieving breadth of outreach (i.e. numbers of clients) takes clear precedence over depth of outreach (i.e. the levels of poverty reached). Institutionists argue for a financial systems approach to microfinance, in which the future of microfinance is dominated by numerous large-scale, profit-seeking financial institutions that provide high quality financial services to large numbers of poor clients. In essence, financial self-sufficiency is the nonprofit equivalent of profitability.

Welfarists, in contrast, emphasize depth of outreach and are quite explicit in their focus on improving the well-being, and often empowerment, of their clients. They argue that a myopic focus on financial self-sufficiency will divert MFIs attention and resources away from their core objective of poverty alleviation for the poorest. Welfarists are less interested in banking per se than in using financial services as a means to alleviate the effects of poverty among families and communities, even if these services require subsidies. The most prominent example of a welfarist institution is the Grameen Bank in Bangladesh and its replications throughout the world, which, unlike institutionist MFIs, demonstrate

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a broad commitment to focusing on who is served. Their objective centers on the self-sufficiency of the poorer of the poor, especially women, rather than the self-sufficiency of the MFI.

By way of background, CGAP was formed in 1995 by a group of ten bilateral and multilateral donors, its largest being the World Bank, who considered microfinance to be a valuable development tool in poverty alleviation. (On December 14, 2004, the International Finance Corporation became CGAPs newest member.) Unambiguously in the institutionist camp, CGAPs mission is to expand poor peoples access to financial services via sustainable (sustainable here is understood as financially independent) or potentially sustainable MFIs (CGAP 1998, 1). Although initially created as a donor coordinating entity, CGAP has since developed into a donor agency and service provider, providing grants to selected MFIs globally and serving as the fulcrum of microfinance policy.

Its growth has been so rapid that CGAP is now seen as the leader in the microfinance industry and has developed what it deems a common language that will help to mainstream the micro-finance discourse. Chief among its best practices to improve the sustainability of the microfinance sector is the explicit goal to standardize and commercialize MFIs the world over. If this ominous signal does not ring Stiglitzian bells, it should be considered that CGAP may be

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overlooking an essential factor of the equation by focusing its efforts solely on the financial structure of MFIs while largely ignoring the unique context of MFIs and the needs of their clients. Even CGAPs own evaluators have suggested changing CGAPs name to the Consultative Group to Assist the Poor rather than the Poorest, as its focus has never explicitly been the very poor (Fox et al. 2002, 3) but rather low-risk moderately poor clients who could likely return a loan with interest. CGAPs evaluators have also admitted that the commitment to sustainability is easier to maintain in principle than in practice. However, donors often pay no regard, insisting upon achievement of sustainability within seven years as a condition for funding. Consequently, CGAP, the Mix and USAID continue to drive institutionist policy upon the best practice of sustainability in any context (Fox et al. 2002, 27).

Microfinance practitioner Hans Dieter Seibel points to the problematic phrasing of best practices as one source of contention within the microfinance industry. Dieter Seibel points to the term as an inappropriate linguistic model, because, organizational science indicates that in complex organizations there are no best solutions, only satisfying ones. Moreover, it is a dangerous term, as it may lead to ...careless replication without regard to given circumstances (Siebel quoted in Smets 2002, 1).

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In this case, the term is seen by many as an absolute standard, precluding practitioners from employing alternative methodologies and discouraging donors from investing in innovative practices (Abels 2002, 2). As a consequence, the promulgation of best practices throughout the industry by CGAP and others has actually hindered MFIs from responding to the diverse needs of the very poor and by dissuading the empowerment of women as a primary objective. In this respect, Abels characterizes CGAP as conceptually bankrupt (Abels 2002,1).

This is not to say that best practices do not have an important function. Indeed, codifying, or even disseminating best practices, is one of the hallmarks of social progress (Einhorn 2001). But the question remains as to how realistic the expectations for widespread adoption are, particularly when the needs of MFIs and their clients are so diverse. The rhetoric of international development has, since the Truman doctrine, relied heavily on the construct that any problem can be solved with a detailed blueprint and goodwill (Einhorn 2001). However, this methodology runs the risk of attempting to essentialize something which is, by its nature, too complex to be codified.

The process of blueprinting a set of best practices for all MFIs to follow is similar to James Scotts methaphorical analysis of Germanys attempt to turn its raw and illegible forests into more manageable or legible rows of a simple

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commodity: timber (Scott 1998, 17). In Scotts example, the best practice model is analogous to the tool of an ax, ultimately lending to the same end result of efficient production. The simplified and replicable model of logging and planting seemed to be an effective way of maximizing wood production in the short termit worked in one context, so why not another? Ultimately, however, the unsophisticated model led to a vast array of consequences befitting of the adage, not seeing the forest for the trees (Scott 1998, 21).

CGAP, too, may be embracing an unachievable vision of legibility. By attempting to make legible that which is complex, this vision runs the risk of drowning out a discussion of realistic objectives and thus undercuts the importance of internal management. It also weakens CGAPs perceived "professional impartiality" as an adviser and partner to developing-country governments (Einhorn 2001). Yet to address these issues, CGAP must acknowledge a series of dilemmas.

First, CGAP absorbs and expounds virtually all of the prescriptive literature on microfinance. Indeed, one limitation in this study is the reliance on literature found via the Microfinance Gateway, the worlds largest clearinghouse of information on microfinance and managed by CGAP. Second, CGAP does not acknowledge the multitude of complexities involved with each MFI, its community, staff, clients, government, etc. Third, simply drawing a road map to a

25

destination does not provide information about upcoming road blocks, stormy weather, or, most importantly, who is in the vehicle.

Morduch has been quick to note that until recently, consideration of who is served by microfinance has been almost entirely absent from the best practices conversation enunciated at most microfinance conferences and in new publications within that last several years (Morduch 2000, 618). Hence, confronting the schism between financially-minded donors and socially-minded programs will require that both sides of the camp define and address the relevant stakeholders. The question Morduch does not directly address is whether the practitioners on either side of the schisms fault lines will find that they disagree on prioritization of these stakeholders. Welfarist MFIs tend to place the greatest emphasis on the clients, while institutionists often choose donors and collegial development institutions as the most important stakeholders. This unaddressed question would have important implications that may explain the differing priorities and policy objectives of MFIs.

Instead, Morduch approaches the subject from another angle, directing his critique towards the widespread standardization of microfinance, a trend which he believes has created a myth of sustainability in microfinance (Morduch 2000, 619). This myth, he contends, has hindered the encouragement of experimentation

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and the exchange of experiences necessary to make the sector stronger (Morduch 2000, 619). Although Morduch clearly rejects the notion of adopting a universal blueprint for best practices in microfinance, he is careful not to take a firm position on either side of the debate. Instead, he suggests a thicker solution that requires a diversity of approaches and techniques in order to achieve diverse and perhaps tailored programs appropriate for unique and changing populations (Geertz 1973, 10).

Building on Morduchs now famous enunciation of this controversial dichotomy in microfinance, another position is offered by Deborah Drake and Elizabeth Rhyne of Accion International, a thirty year old MFI operating throughout countries in Latin and South America. Drake and Rhyne posit that the microfinance schism has evolved into a debate about the increasing commercialization of the microfinance sector, a by-product of globalization which has increasingly come to be seen by large development institutions as a necessary step to providing high quality services to the poor. The authors repeatedly return to the fact that this trend has increased the polarization within the sector, along the fault lines of the original schism, with critics of commercialization arguing that the introduction of a profit motive in microfinance intrinsically degrades an MFIs commitment to the poor (Drake and Rhyne 2002, 3).

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Those who see the commercialization and standardization of microfinance from this position (the welfarists) tend to describe it as a process by which something loses its essential quality in order to gain profit, for example, the commercialization of Christmas (Drake and Rhyne 2002, 4). In the same way that this once spiritual holiday has become debased by excessive consumerism, the commercialization of microfinance has already begun to transform what began as an altruistic desire to help those living on the brink of survival into an opportunity to make a profit on the backs of the poor the poorest of the poor, no less. Moreover, Drake and Rhyne argue that the profit motive detracts from service quality in a kind of zero-sum game in which more profit equals less service (Drake and Rhyne 2002, 4).

If this equation is correct, as Drake and Rhyne posit, it may explain why so many MFIs are now experiencing a mission drift from the original Grameen model of microfinance as a tool of self-sufficiency and empowerment for the poorest of the poor (Drake and Rhyne 2002, 4). It is likely that the increasing commercialization of microfinance and the need to satisfy the demands of investors will inexorably lead to the displacement of self-sufficiency and empowerment in favor of profit. According to Renee Chao-Beroff (Chao-Beroff 1997, 105): There is thus great risk of diverting the newly created professor of peoples banker or of the micro-financing for the poor from its proper objective. The fact is that if priority is given to making

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[MFIs] profitable as quickly as possible, then the poorest will automatically be marginalized in favor of populations that are supposed to be more creditworthy. Similarly, the rural areas, in favor of urban areas, which are more densely populated and provide better commercial opportunities. Proponents of commercialization (the institutionists) would argue, however, that the uniformity promoted by commercializing microfinance organizations will allow them to utilize traditional banking methods and to offer a more diverse array of financial products and services at a more competitive interest rate. Predictably, the arguments from this camp suggest that the welfarist approach of focusing on empowering the poorest of the poor will keep MFIs more dependent on donors, rather than independently sustainable.

The question of which side of the schism may offer more salient arguments may be irrelevant. If current trends indicate the future of microfinance, the welfarist approach will not only be overshadowed but largely discredited by development institutions and donors. As the largest microfinance donor, CGAP holds tremendous sway over this contentious debate. While CGAPs initial emphasis on the creation of sustainable MFIs was but one of many important considerations in microfinance management, the current single-minded concentration on sustainability of the institution has superceded all other equally relevant indicators of success (Althmer 2004). Here lies the crux of the dilemma of donor influence;

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if MFIs question the best practices imposed by their donors, they risk their credibility and access to donor funds. MFIs that have expressed doubts about their capacity to reach sustainability without mission drift have found themselves virtually blacklisted from receiving support from microfinance experts and donor agencies (Abels 2002, 3). Thus, the fact that many MFIs now favor institutional sustainability over poverty alleviation or empowerment as their primary objective must be taken with a large grain of salt (Hatch 1998, 2).

The question then becomes, to what extent are the objectives of financial selfsufficiency and reaching the poorest compatible? For many SHGs in India, their clients tend to be concentrated in hard to reach rural areas characterized by dispersed populations and underdeveloped infrastructures. These factors imply both relatively high costs and relatively greater risk to reach the poorest. There are other factors that signify relatively high administrative costs as well, such as the difficulties of identifying and then reaching target clients, and the monitoring costs associated with a lack of collateral (Conning 1999, 4). In short, delivering financial services to the poorest is comparatively costly, difficult, and fraught with risk, hence the belief that financial self-sufficiency and ability to reach the poorest are inherently dichotomous.

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Drake and Rhyne do not address the possibility of reconciling the two camps, but rather vaguely suggest that there may be potential for compatibility (Drake and Rhyne 2002). However, the tone of their book indicates that the authors are not convinced that a truce is possible, and, judging from the trends in the sector today, it is understandable why: the institutionists, fueled by arguably hegemonic aspirations, appear to have gained ascendancy over the welfarist approach.

This perceived ascendancy can be attributed in part to what Benjamin Bagdikian refers to as a media monopoly. That is, the institutionist position has a positional advantage in its articulation in virtually all of the literature coming out of the World Bank, CGAP, and USAID. In other words, virtually all of the published literature in the field of microfinance favors the institutionist approach, lending it a somewhat hegemonic dominance in the industry and representing clear implications for new donors who assume unity throughout the microfinance sector.

Woller, Dunford and Woodward liken the microfinance schism to George Bernard Shaws characterization of Great Britain and the United States as two nations divided by a common language (Woller et. all 1999, 32). Though the two sides share a common goal of poverty alleviation, there exists an underlying and fundamental absence of unity of purpose. These differences, as Woller,

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Dunford and Woodard intimate, represent far more than mere philosophical debates, in that how they are resolved has crucial implications for the future of microfinanceits guiding principles, its objectives, its clients, and its impact on the poor and on poverty in general (Woller et. all 1999, 31). The apparent unity of purpose in the microfinance sector has fostered a one-size-fits-all mentality and many have become confused by the veil of unity and CGAPs argument that a common set of standards (i.e. standardization) is needed to advance the industry (Woller et. all 1999, 31).

Microfinance scholar Linda Mayoux attributes the appropriation of microfinance by institutionist advocates to the perceived attractiveness of microfinance programs. That is, they have been marketed as yielding high outputs with little inputs, merely an initial injection of funds, some of which may even be recouped (Mayoux 2002, 6). Moreover, Mayoux adds that such programmes could be quantitatively assessed in terms of reaching many thousands of poor people, particularly women, thus satisfying poverty and gender lobbies and the tax-paying public (Mayoux 2002, 6). This coupling of profit and charity in the eyes of donors is crucial in that it has been used to justify a shift in funding streams from organizations that have been staunch supporters of participation and empowerment (which reached fewer women and were more difficult to qualitatively evaluate) to those which could show prowess in their financial

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capacity. From this point on, donor expectations in microfinance were irrevocably altered to encompass a promise of return on investment (ROI), rather than an altruistic investment. Much of the funding to MFIs is now conditional on the fulfillment, or at least prioritization, of a financial sustainability criteria imposed by CGAP and other major donorscriteria that sounds eerily similar to the SAPs that caused the abysmal poverty rates MFIs are now seeking to transform (Mayoux 2002, 7).

Thus, the contentious debates within the microfinance sector suggest that the practical implications of the differences between the camps are at least threefold, diverging upon: (1) differences in the clients served (the moderately or bankable poor vs. the poorest of the poor); (2) differences in organizational design (organizations that employ heterodox policies tailored to meet the needs of specific communities and clients vs. commercialized and standardized MFIs that follow a blueprint of best practices); and (3) differences in the organizational structures and financing to support these services (NGOs and SHGs vs. commercial banks and finance companies).

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Oddly enough, the argument that has not been articulated in this debate thus far is the issue of the transference of agency from the poor clients and local practitioners to large-scale international donors, and what could arguably be the disempowerment of microfinance clients if this trend continues. Similarly, both Morduch as well as Drake and Rhyne seem content to accept that it is logical for this shift in focus because financial statistics are easier to measure than empowerment, a twist on the quantitative versus qualitative debate, rather than questioning whose interests are being served by such a shift.

Mayoux argues that this institutionist shift should have prompted more serious questions within the microfinance sector about whether or not women (as microfinance clients) are simply being used as unpaid debt collectors for development agencies (Mayoux 2002, 8). Further, she argues that poorly designed MFIs which do not take these concerns into account may not only have no positive impact, but may actually increase household poverty and promote further marginalization among already marginalized populations. (Mayoux 2002, 11) This is a crucial and disturbing point, in that it suggests that trend of microfinance, developed to reach a formerly unreachable segment of society comprised of poor women, now has the potential to exacerbate the feminization of poverty rather than to heal it.

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The failure of microfinance organizations to remain focused on the intrinsic component of promoting empowerment and addressing womens unique needs is, and should continue to be, of great concern to the development sector. Reminding us that much of the reason for the high repayment rates (and hence, the success of most MFIs) was because the loans were given to women, Mayoux emphasizes that the contributions of microfinance to poor womens empowerment and selfsufficiency should not be lost in the debates du jour (Mayoux 2002, 11). Mayouxs analysis suggests that underlying the current microfinance schism, there are actually three contrasting paradigms, rather than two (Mayoux 2002, 21): 1) the welfarist or poverty alleviation paradigm; 2) the institutionist or financial self-sustainability paradigm; and 3) the feminist empowerment paradigm. Each of these models constitutes a distinct discourses arising from differing premises, each focusing on a different goal or aspect of microfinance as its core. If one considers each paradigm to be equally valid, serious questions must be raised addressing the complicit acceptancenot just promotionof the institutionist model within the development sector.

As Mayoux suggests, there is a need for the microfinance sector to move beyond its preoccupation with financial sustainability, leading to a misplaced focus on

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commercialization and standardization. The emphasis should revert from what Christopher Dunford has referred to as a mistaken focus on the vehicle of microfinance rather than the passengers inside, their route, and final destination (Dunford 1998, 2). Rather, the microfinance sector needs to address the current program model for institutional sustainability and find a way to address the barriers that currently prevent the poorest of the poor from substantially benefiting from microfinance.

The literature reveals the diversity of approaches for effective microfinance program models, and suggests that dissent about the superiority of one model over another is widespread, if not apparent to the casual observer. Yet the literature also suggests that if not carefully designed and implemented, MFIs have the potential to cause more damage than good by ignoring the unique needs of the communities and populations they serve. Donors that promote the expansion of best practices risk becoming antithetical to the objective of poverty alleviation among the poor. MFIs that negate or challenge the adoption of institution-driven best practices run the risk of alienating microfinance, experts, colleagues, and donors. And MFIs and donors that neglect the importance of empowerment objectives may inadvertently sabotage their own success rates as well as miss an important opportunity for social change. It is a tenuous balancing act.

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The microfinance sector could find middle ground by employing each of the institutionist, welfarist, and empowerment-focused approaches in tandem to reach both the moderately poor and poorest women clients. For India, a country that holds a third of the worlds poorest citizens, exploring these issues further is not only relevant, but critical.

SECTION 3.2 The Importance of Empowerment and Microfinance: A Brief History of International Development Proponents of microfinance often draw upon its unique and historic role as a defining practice that recognized the needs of women as distinct and worthy of attention, a feature particularly credent in a heavily patriarchal field that viewed women as passive agents of development. One reason that microfinance has received such widespread attention as a development tool lies in its exceptional ability to provide an opportunity for women to become empowered in the process. The approach not only provides economic benefit to the participants, but also addresses more complex dimensions of poverty; isolation, a sense of inferiority, and powerlessness. This is one reason many welfarists have reacted so strongly to the abandonment of empowerment as integral to the mission or its relegation as a secondary bonus rather than a primary goal of microfinance.

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The roots of empowerment as a vital feature of gender-consciousness development can be traced to their initial vocalization within the context of the United Nations Decade for Women (1976-1985), a decade when the feministdevelopment nexus provided an atmosphere that allowed for an examination of the effects of development policies on women and the deconstruction of their underlying assumptions.9 The critiques ranged from questioning the idea of integrating women into development, to challenging the methods used to gather the data from which development programs are designed, to advocating a radical new framework of development in which the intersubjective priorities and challenges of women in developing countries were examined (Tinker 1990, 74).

The central impetus of this movement was to challenge the prevailing planning stereotypes which had ignored the structure of families, and of womens multiple role within families, and to reconstruct development programs that recognized the sexual division of labor within low-income households (Momsen 1991, 102) At the time, the two main approaches to development rested upon modernization theory and dependency theory, both of which ignored the role of women. Modernization theory tended to view development as an evolutionary, linear process whereby societies continue to progress until they reach the same economic development stage as Western capitalist countries. Drawing on the
Prior to 1975, less than 1% of standard textbooks on development referred specifically to women (Leonard 2003, 76).
9

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work of Talcott Parsons, families were seen as nuclear units in which the man worked outside the household and the woman inside, with no influence on either the formal or informal economy (Parsons 1951).10

Likewise, dependency theory tended to focus on the polarization that developed through capitalist modes of production in which underdeveloped countries revolved as satellites around developed countries at the core (Prebisch, dos Santos, Gunder Frank, Cardoso, and Amin) Dependency, in this sense, is a relationship that existed between countries, rather than people. Therefore, the dependency of the developing world on the developed supplanted an analysis of the dependency of women on men ((Leonard 2003, 77). As Aidan Foster-Carter stated, dependency theory viewed women as the satellite that was no ones metropolis (Foster-Carter 1985, 12). Dependency theory views gender relationships only in the context of productionand perhaps reproduction which render the household and women invisible. World system theory expanded both the modernization and dependency models to look at the global economic system, which at least acknowledged the role of the household in the global economy and thus exposed a capitalist patriarchy. However, none of these theories are able to provide a framework that addresses and examines issues that affect women in developing countries.
10

Catherine Scott, in Gender and Development, suggests that this vision of modernity presents a narrow-minded view of what it is like to be modern (Scott 1995).

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Endogenous obstacles to development, such as inequities in the distribution of land, income, and participation, were not necessarily seen as interconnected with gender relations, and the failures of development were linked to overlooking (at best) or underestimating the role of women in both the economy and society. The first challenge to the neglect of women in development came from Esther Boserup, who revealed the allocation of gender roles in farming and trading based on a mistake assumption that all farmers and traders were men (Boserup 1970). Boserups solution to the economic marginalization of women was to include them into the development process, and her recommendations included education (Boserup 1970). Her critique gave birth to the concept of gender-conscious planning which was able to refocus the attention of development planners to move beyond meeting the practical needs of women (i.e. food and shelter) to the strategic needs of women, that is, those which can empower women to move beyond existing social structures by giving women a voice in how these needs are met. (Momsen 1991, 102-104)

Adopting a gender-conscious perspective to development involves examining not only the power imbalances between developed and developing countries, but power imbalances between women and men within developed and developing countries. This is by no means an easy task; women are obviously not a homogenous group and live in countries diverse historical experiences, levels of

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development, and social stratification according to class, race, religion and other variables (Leonard 2003, Scott 1995, Boserup 1970). Yet women do share certain characteristics, and as the majority of the human species, their absence from the development discourse was preposterous.

The shifts in development brought forth by the what became know as the Gender and Development (GAD) and Women in Development (WID) schools of thought, must be understood in the context of the dominant development discourse of the 1970s, which centered around the debate of dependency theory and world-system theory. By the time microfinance began to emerge from Bangladesh in the 1980s, these theories were generally discredited, along with other problematic development initiatives such as rapid industrial development via import substitution in Newly Industrializing Countries (NICs). What was significant in this discussion was the ability of the GAD and WID proponents to redirect attention towards the issue of distribution or redistribution of resources.

Women's poverty is mired in the absence of economic opportunities and autonomy, lack of access to economic resources, including credit, land ownership and inheritance, and lack of access to education and support services. At the root of many of the structural barriers imposed by international actors lies a Keynesian approach assuming that growth of commodity production will automatically

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improve the satisfaction of basic needs within a country. Yet the expansion of cash-cropping, industrial factory development and production for export has not been accompanied by the trickle down of benefits to the poor, especially poor women.

The pivotal aim of WID was to simply bring women into development, with the somewhat nave assumption that if women were made visible and included in the development process, they would no longer be marginalized and everyone would benefit. In a sense, the WID movement served to organize a collective voice of Gramscian organic intellectuals who played a crucial role in articulating the interests of the social classes that were not in power. However, there were limitations in that the major aim of WID was simply to bring women into development, with the assumption that if women were made visible and included in the development process, they would no longer be marginalized and everyone would benefit. The obvious flaw in this approach is that it did not fully challenge the existing social structures or the causes of womens subordination, and instead reversed its focus from women as housewives and mothers (or recipients of welfare) to women as producers in the economy.

As neo-liberal approaches to economic development gained popularity, the integration of women into development increasingly became seen as efficient

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and thus, the idea quickly spread. The obvious flaw in this approach is its failure to challenge the existing socio-structural mechanisms that affirmed womens subordination, and thus, although women were now seen, they were seen as housewives and mothers (read: recipients of welfare). The shifting development paradigm missed the critical component of recognizing that women hold multifarious and overlapping roles in society and have always been a part of the development process, and further, perpetuated a paradigm in which women still lacked agency. Western development institutions, though paying lip service to womens equality, were still largely viewed form the South as homogenizing and portraying poor women as victimized Third World agents rooted in neocolonial dependency (Crawley 1998, 33).

Neo-liberal economics, as they are currently employed, were often criticized by WID advocates for ignoring the challenges of gender inequities in favor of efficiency. Structural Adjustment Programs (SAPs), which emphasize cutting costs in order to better exploit womens work, exhibit this paradigm well. The ensuing developmentalism critique that characterized poverty alleviation initiatives as a Western imposition forcing non-Western countries into a particular set of economic priorities without regard to their specific needs is one which has clear echoes in the current practices of microfinance blueprinting. Likewise, the GAD and WID critiques that led to the incorporation of gender mainstreaming

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were seminal to the founding of practices such as microfinance, in that they prompted an examination the gender-specific mechanisms of exclusion and of the processes though which gender relations were negotiated factors which were critical in understanding the nature of households, the informal economy and other aspects of development (Rowlands 1998, 15). Moreover, the advent of intentionally gendered analysis deconstructed the supposedly neutral institutions of development, such as the World Bank and USAID, and exposed the structural bias existent in both the development institutions and their mechanisms for delivery and analysis without any participation on the part of those receiving the aid (Rowlands 1998, 15).

SECTION 3.3 Womens Participation in Development The unprecedented interest governments and development institutions have taken in the concept of womens participation can be attributed to several factors. The first is that the results of participatory development, in various countries around the world, demonstrated that womens participation is not a risk to governance, but in fact may serve to strengthen and affirm the states power (Rahnema 1992, 117). In other words, the concept of participation is no longer a threat. The second factor, which goes hand in hand with the first, is that womens participation has become politically attractive. There are obvious political advantages which can be

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obtained through an ostentatious display of participatory intentions (Rahnema 1992, 118). However, the most relevant factor may belie a more interesting revelation; that womens participation is economically appealing, especially to many developing nations who are in debt as a direct result of other economic development programs. In such instances, when LDC countries are required to adjust their economies through SAPs or other development initiatives, nothing can be more financially attractive than passing on their costs to the poor (Rahnema 1992, 118).

Some of the early proponents of participatory development picked up on this unintended consequence. That development planners, politicians and state leaders intended to co-opt the concept of participation for their own ends was not a great shock, but one that needed to be quickly addressed, nonetheless. Development practitioners thus began to experiment with the structure and design of participatory development programs, attempting to close any loopholes that might allow a hegemonic grasp to exploit the poor. A more refined concept of participation was born from one of these experimental methodologies which came to be known as popular participation,11 a more sophisticated process which

11

Popular participation and participatory development are often used synonymously. However, popular participation focuses explicitly on disadvantaged groups, defined in terms of wealth, education, ethnic and gender structures. In contrast, participatory development is a more general practice in which disadvantaged groups are often subsumed under the broader category of stakeholders in the community.

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aimed to achieve a kind of power that belongs to the oppressed and exploited classes and groups, and to enable them to advance towards shared goals of social change within a participatory system (Weinberger 2000, 16, and Rahnema 1992, 120).

Popular participation both enjoys a greater legitimacy and serves an important role in the development aegis. It affirms that conventional heterodox development theory has long represented the interests of industrialized countries without equal consideration of the cultural or gender interests of those it serves. Additionally, as a political function, popular participation provides development with a new source of legitimization by giving agency to previously voiceless poor women who could only receive development as passive subjects. Finally, it serves an instrumental function as a means of providing poor women with alternatives, an important step in empowerment theory.

The most important methodologies designed to incorporate popular participation into development include Participatory Action Research (PAR), Participatory Learning Methods (PALM), Participatory Rural Appraisal (PRA) and Rapid Rural Appraisal (RRA) (Weinberger 2000, 17). Arising from dissatisfactions over biases inherent in the way outsiders interacted with the rural poor, such as a tendency to only visit villages that were close to main roads, or to speak primarily

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to men who were assumed to have a higher education than women, these variations on the popular participation methodology attempted to provide more effective methods of learning for those that development projects served (Singh 1997, 177). Indeed, these methods succeeded in elevating the status of local and indigenous knowledge in the view of outsiders.

However, the approach was unsuccessful in allowing local participants to participate in any real analysis of the program, and this failure was often attributed to the illiteracy of the clients (Singh 1997, 177). Development professionals in India attempted to address this issue and increase womens participation by allowing them to create their own maps and models for purposes of analysis, which proved to affirm that they were indeed more than capable of creating alternative visual representations using local materials (Singh 1997, 177). This recognition of rural women villagers abilities to invent their own forms of analysis caused development practitioners and development planners alike to reexamine the ways in which the posturing of outsiders as experts may have preempted any possibility for learning from and with local people (Singh 1997, 177).

The multifarious benefits of participation as an integral part of development programs such as microfinance have rightfully been hailed for allowing womens

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voices to be heard and giving them more control and voice over the processes that impact their lives. However, this must be taken with a grain of salt. The operative phrase here is that women have been given this power to participate, revealing the subject-object dichotomy that perpetuates biases towards women in development. Given the fact that womens empowerment has been framed within an economic context, that is, that their participation in activities such as microlending may have economic benefits for society as a whole, one must wonder if improving womens lives would still be deemed as important if there were not so many benefits for others. One of the central critiques of participatory development is that many institutions see participation as an end in itself, which does not truly allow women to follow participation to its logical conclusion: that women can become empowered in the participatory process.

The effects of the WID and GAD movements within the development discourse left an indelible mark upon the industry and reformulated the development paradigms from local NGOs to World Bank policy. Microfinance programs now replicated and employed from Tanzania to south side Chicago are a primary example of addressing the strategic needs of women in poverty alleviation programs, precisely because they target women as the fiscal agents of the

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family12. However, they are incomplete without the self-motivated participation of those being served by the programs, whose ultimate goal is emanicipation from passivity or empowerment.

The concept and discourse of empowerment is intertwined with microfinance, or at least, has been until the recent trend to commercialize and standardize the industry. As an intended outcome of the participatory development model, empowerment helped perform an important political function; to provide development with a source of legitimization. However, the addition of the empowerment variable to the development discourse raises difficult questions about the construct of empowerment itself. That is, in order for a development agent to be empowered, one must first assume that this agent either does not have any power or does not have the right kind of power.

Epistemologically, it should be understood that the meaning of the term empowerment itself is not very precise, in part because of the contested meaning of its underlying root power. Though a discussion of the nature of power is obviously beyond the scope of this study, for the purposes of this discussion, let us assume that this description refers to power over, or the ability

12

Research in microfinance programs has overwhelmingly shown that women are far more adroit at effective fiscal management than men, in that the funds are evenly distributed for practical needs throughout the family.

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to control in some way the options or actions of another, whether overt or subtle. The immediate problem with this perlustration suggests that power can be bestowed upon one agent by another. If this is the case, can it not be just as easily withdrawn?

In her book, Questioning Empowerment, Jo Rowlands suggests that the fuzzy definition of empowerment is perhaps more problematic than we realize. Essentially, Rowlands argument is that unless empowerment is given a more concrete meaning, it may be ignored, confused, or used to obscure or divert important debates (Rowlands 1997, 8). Further, the failure to concretize the definition of empowerment considerably weakens its value as both a tool for analysis and as a component of a strategy. There are, however, other ways of understanding or conceptualizing power and empowerment, which focus not just on a set of results but also on process. A more Foucaultian model would allow for a more comprehensive understanding of power and knowledge relationships, and this model is drawn upon often by feminist scholars who incorporate a gender and power analysis in order to identify internalized oppression and resulting barriers to womens exercise of power. Here, possibilities for power to, power with, and power from within become possible (Rowlands 1998, 15).

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Defining empowerment is inherently contentious and often raises more questions than answers (Mayoux 1998, Kabeer 1999). If the promotion of empowerment, like power, carries with it an intrinsic relationship to knowledge, how can development practitioners facilitate empowerment without imposing an agenda, even if the agenda is altruistic? If empowerment implies some sort of epiphany about ones own recognition of power, how is this enabled and identified? Can empowerment ever be a measurable outcome?

Although there is little evidence of a consistent analytic framework with which to measure empowerment or assess its impact on development outcomes, various studies utilizing a broad range of indicators and instruments have attempted to do so. For the time being, anecdotal evidence from the field is what is available, though this is recognized as a limitation within the research. Though most studies report empowerment as an outcome of microfinance, automatic benefits to women cannot be assumed. Many evaluations of microfinance programs have assumed that high repayment levels indicate positive impact on womens empowerment and have not investigated further. Existing studies of empowerment, mainly from Bangladesh, have employed different definitions of empowerment and different methods of investigation and reached rather different conclusions, even about the same organizations. However, despite its nebulous form, empowerment remains a key goal in many microfinance programs and its

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value as a buzzword within the development industry has been invaluable in receiving donor support.

Let us take a closer look. Although microfinance differs slightly in each country, its function of empowering women to start their own businesses using the skills they already know, rather than being forced to adopt the methods prescribed by the IMF, have proven to be immensely successful. The unique feature that microfinance proffers is the potential to make significant impact in womens lives by providing opportunities to help overcome socio-structural barriers, such as access to credit and other banking services. By regaining control over incomegenerating activities and contributing to household income, women often gain a sense of empowerment through their work enabling them to become more actively involved in decision-making both at the micro and macro level; within the home and with the political and social life of their village. Communities with successful microfinance programs also tend to see lower rates of domestic violence, rape, and child labor, and increased civic participation by women as their status within the household and community improves.

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SECTION 3.4 The Long And Winding Road: Where We Are Now How has the trend towards commercialization and standardization of MFIs affected their efforts to help empower their clients? One need only look at the recent reports of CGAP and ACCION to see that best practices promote lending to moderately poor or men as a means of lowering the risk to donors. That is, in order to ensure that wealthy international donors, those who can afford to invest, will secure a profitable ROI, empowerment has been relegated to an acceptable by-product of microfinance, rather than a central goal.

But the danger in this model of best practices has other implications as well. The effectiveness of microfinance has often been challenged precisely because the poorest are not reached, and the benefits do not extend to the target group. In their study, Who Takes the Credit: Gender, Power and Control Over Loan use in Rural; Credit Programs in Bangladesh, Goertz and Sengupta found that the majority of women clients did not control either the loans received or the income generated from their microenterprises (Goertz and Sengupta 1996, 2). Goertz and Sengupta concluded that microfinance programs have the potential for empowerment, but this potential is not always realized. Obviously, there are several other factors, both endogenous and exogenous, which may affect the outcome of empowerment, including patriarchal structures in society and in the

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family, program design, staff quality, etc. However, the authors results point to the potential of MFIs to help achieve empowerment if designed well.

Nan Dawkins Scully states that MFIs under pressure from donors to become financially self-sufficient in a short period of time target less poor or moderately poor borrowers who can take out larger loans. Many complain that they cannot cover their costs when traveling to remote villages and areas to find potential clients. Others attempt to pass on their costs to their clients by charging exorbitant interest rates which are not much higher than those of predatory moneylenders, while forgoing sometimes costly services to improve the productive capacity of their clients. According to Jaya Sangam, Microcredit will never be the only solution to poverty, especially when it comes with exorbitant interest rates [which] create a debt burden on the poor.13

The problem is even more complicated in India. With the recent proliferation of thousands of SHGs that provide microfinance services through the World Bankfunded Swayamsidha or Integrated Womens Empowerment Program, the objective of all around empowerment of women often fail to meet their stated objective because they are in direct competition with other World Bank-funded programs, such as SAPs. The neo-liberal economic policies prescribed for India
13

Quote taken from interview on December 18, 2003.

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after its financial crisis in the early 1990s offered solutions that indirectly impeded womens ability to participate and prosper in the informal sector by focusing on programs that favored export production (typically male-dominated in India) over subsistence crops (typically female dominated in India) and trade agreements that favored the interests of multinational corporations (MNCs) over local workers.

The cumulative effect of these policies, including rising costs and declining demand, and competition from cheap imports, has led to shrinking profits in the informal sector and has hit poor women hard. In a sense, microfinance, as prescribed by the World Banks Swayamsidha program, has relied upon a macroeconomic view that ironically ignored both the practical and strategic needs of women and thus, misses the critical opportunities that would foster empowerment. In a very real sense, the program thus has the potential of becoming inflexible dogma unless the unique environment and needs of women and their families are taken into account.

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CHAPTER 4: THE RESEARCH DESIGN AND FINDINGS

SECTION 4.1 Design And Methodology I modeled my case study using Charles Ragins Comparative Qualitative Analysis (QCA) methodology because it allowed for qualitative comparison of differing MFIs and their methods of operation while giving particular attention to the combinations of independent variables. I felt that the CQA methodology was well suited to allowing me to better understand, through the use of comparative research, how certain variables affecting MFIs in India could be understood within the context of the whole. That is, through analysis of their intersections I hoped to see which combinations of factors might produce a certain outcome (Ragin 1987, x). As Ragin describes in Constructing Social Research, I focused on two of the seven goals of social research: a) identifying broad patterns, and b) advancing new theories for explanation (Ragin 1994, 32-53).

To collect the data necessary to undertake this study, I spent several months reviewing an array of literature on microfinance, international development, women in development (WID), development in India, and country specific studies on NGOs and civil society. I utilized scholarly journals and books, as well as technical reports for theoretical debates surrounding women and the informal

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sector, and information aviable from major development clearinghouses (such as the World Bank, The Microfinance Gateway, etc.). Conference briefings as well as reports issued by NGOs and development agencies were also primary sources of textual data for this work.

I focused my study on two MFIs in southern India, and designed an interview strategy, list of questions, and additional information to collect through personal interviews with senior staff of the MFIs in December 2003 (See survey Appendix 1). The questions were chosen after carefully looking at available surveys used to conduct other research for style guidelines, and to garner the information needed to answer the relevant questions for my research. Additional questions that might help to explain why answers were so, or lend greater contextual detail, were added to complement some of the central questions. Warm-up questions were integrated at the beginning of the survey to allow interview subjects to become comfortable talking with me, so that when the more difficult or involved questions came later in the interview, a rapport and trust had already been established.

The study was designed to be a qualitative analysis of two microfinance organizations in India that had been practicing microfinance for at least fifteen years. India is home to an extraordinary number of heterogeneous MFIs, the

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greatest aggregation of which are in the southern states, which can perhaps be attributed to the long history of Christian social welfare efforts in the region. I excluded organizations that did not meet my criteria to reduce the possibility that 1) the organizations methodologies would have been designed during the recent period of international influence towards microfinance commercialization; and 2) that the organizations would they be structured to follow the more recent Indian SHG model now practiced in thousands of villages throughout the subcontinent. This criteria made the subjects more likely to have developed their own organizational mission, structure, and program design without the influence of large donors, government or institutions, rather than a more common, replicable model. Similarly, the organizations would have been formed without the influence of local, state or national government pressure to attract more foreign investment from development agencies or donors. Additionally, the choice to limit the study to organizations that had been in operation for at least fifteen years provided additional assurance that their organizational structure and programs were sound enough to have survived the collapses seen by many other MFIs in the country.

My second set of criteria was to select two organizations with similar characteristics, but with a distinct difference in size. That is, a relatively small, lesser known MFI and a larger, more well-known MFI. This criteria was chosen so that I could examine to what extent size and success, in terms of notoriety,

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were determined or influenced by the MFIs relationship with donors. It was my hypothesis that a larger, more well-known MFI would likely owe its success to its relationships with a larger international funding institution and that this relationship would, to some extent, determine the policy of the MFI.

To determine potential candidates for the fieldwork of the study, I developed a spreadsheet listing potential organizations that fit my criteria, including their location (state and city or village), number of years of operation, their focus or mission as stated in their public materials and program descriptions, and their contact information. I researched this information from publicly available sources including the internet and microfinance and development periodicals. I excluded organizations that had been in operation less than

After determining a handful of organizations that fit the specified criteria, I began the process of submitting a protocol application to collect research to DePaul Universitys Institutional Review Board (IRB). I had already received my certificate from the National Institute for Health certifying my completion of the Human Participant Protections module from a class in organizational research the previous year, which I sent to the IRB for their records. I then met with appropriate faculty in both the international studies department and public services department to serve as my Local Review Board (LRB) advisors for my

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research. I chose for my LRB Dr. Shailja Sharma (International Studies/English department), Dr. Ronald Fernandes (Public Services department), and Dr. Woods Bowman (Public Services department). Both Dr. Sharma and Dr. Fernandes are natives of India and have significant expertise on the subject of NGOs in India. Dr. Sharma also serves as my thesis advisor. Dr. Bowman has significant expertise in financial management and organizational behavior, and has served on many LRBs. The LRB carefully read my proposal, offered a few minor suggestions for revision, and then approved my proposal and submitted it to the IRB.

Upon receiving approval from the IRB, I sent an initial contact e-mail to the organizations that met my research criteria, inquiring as to whether they would be interested in participating in the study. I did not receive responses from every organization I contacted. Those that did respond, however, seemed happy to participate. After I had received an initial response to my inquiry, I made phone calls to the offices of the organizations in India to confirm the dates of the visit.

In December, while on break from classes at DePaul, I traveled to India for two weeks to collect research for my study. Upon arriving in the cities where each MFI was located, I meet with my subjects, both Executive Directors of their respective organizations and both fluent in English, to sign a letter of consent to

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be interviewed. I then had to find public facilities from which I could fax the signed letters of consent to the IRB at DePaul. The following day (due to the time difference), I searched for public internet cafes where I could contact the IRB via e-mail to determine if my fax had been received and approved. Both of these activities proved to be logistically difficult, as electricity comes on and off throughout the day and night in India, and as local infrastructure for data lines that support phone, fax and internet capability are often inconsistent and unreliable. For both interviews, I waited in line for what appeared to be the sole public fax machine in town for over an hour, only to be told that the shop was inexplicably closing for a few hours and to come back the next day. Before my first interview, it took me three motor rickshaw rides through the city, on the advice of some helpful young teenagers, attempting to find additional facilities that might offer a public fax and internet connection. On several of these rickshaw rides, our rickshaw actually ran over data lines, once because the telephone pole had collapsed and another time because monkeys had swung on the lines and caused them to fall into the busy street below. Fortunately, both letters of consent were received and approved by the IRB.

Before beginning my interviews with my subjects, I again explained the purposes of my research and asked that they repeat this back to me so that I could verify that their understanding was correct. The personal interaction with the

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organizations allowed me to collect a more thick description of the environment and served to reduce any problems with a confusion of tongues. I then asked that they sign another form of consent, which I sent to the IRB upon my arrival home in the U.S. The identities of my subjects were kept confidential to protect their privacy, and I explained that they would be given pseudonyms in my study. I borrowed enthographic research techniqueskey informant interviewing, semistructured interviewing, oral questionnaires, and participant observationto collect on the ground evidence and impressions from the participants to enhance my representation beyond peer-reviewed scholarship and international policy publications.

While interacting with my subjects, I followed the guidelines set forth by the IRB and the federal Office of Human Research Protection (OHRP) to ensure that my research was in compliance with the code of federal regulations at all times.

SECTION 4.2 The Findings My research was intended to determine how the recent trend to commercialize and clone microlending SHGs in India via the propagation of a standardized blueprint model may have caused a mission drift for organizations practicing microfinance in India. An additional component of my research was to examine

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whether MFIs can continue to be effective in their role to provide empowerment and self-sufficiency to the poorest of the poor given the recent shifts in the sector which favor financial sustainability over womens welfare, and whether they can remain accountable to the communities and clients they serve. It was my hypothesis that within the last decade, large development institutions and other donors have encouraged a shift in the mission of MFIs from a focus on empowerment and reaching poor women previously excluded from development efforts particularly dalits and adivasis to increased financial sustainability via lending to only the moderately poor. The study was intended to investigate whether this has weakened their accountability within the communities where they operate and, given the failures of these development institutions, continues to exacerbate the feminization of poverty.

The results of my interviews, however, yielded interesting results. The first organization I interviewed was Prem Sangam14, a small MFI that has been working in a rural coastal village area in the southern state of Andhra Pradesh since 1981. The second organization I interviewed was Jaya Sangam15, a larger MFI that has been working in an urban area near Chennai in the southern state of Tamil Nadu since 1978. Both subjects, Prem Patel16 at Prem Sangam, and Jaya

14 15

Prem Sangam is a pseudonym. Jaya Sangam is a pseudonym. 16 Prem Patel is a pseudonym

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Singh17 at Jaya Sangam, each directors of their respective MFI, met with me at their organizations to discuss their organizational values, programs, and changes within the greater microfinance sector. An analysis of the findings in these cases follows.

CASE 1: Prem Sangam (Vishakapatnam, Andhra Pradesh) Prem Sangam was formed in 1981 in a rural area outside of Vishakapatnam, Andhra Pradesh by a small handful of individuals. The organization began with limited resources, a broad mission of socio-economic development, and a vision to create a just society which recognizes the dignity of a person through sustainable development (Patel 2003). Emphasis was placed upon socioeconomic programs that supplied resources and services to mainly rural villages.

Prem Sangam identified four critical village areas and assigned one staff member to each, expanding to other areas as word of mouth carried to other villages and demand for their services grew. As Prem Patel described, We spread from village to village, then we were at 90. Then that doubled.For over a year we did this. So this is the way we are promoting this, woman to woman, village to village. This word of mouth model, fostering legitimacy and capitalizing on
17

Jaya Singh is a pseudonym.

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personal experience, has obviously been successful. Today, Prem Sangam provides programs and services to 185 villages spread out over a 100 km radius (Patel 2003).

Prem Sangam targets their services towards poor women in rural areas surrounding Vishakhapatnam. As Patel described, Prem Sangam quickly became convinced that women is [sic] the best entry.through her, to her family. Their focus is to work only with the very poor, with the aim of making the women shareholders of their own institution rather than dependent on external charity.18

Innovative Programming Prem Sangam differs from the blueprint SHG model significantly in its broad range of services. Although microfinance is the flagship program of Prem Sangam, the organization also supports environmental programs such as agro forestry (providing plants community block farming, planting trees in waste lands, etc.), health services, disaster preparedness, and a child care program for young children ages three to five so that their mothers can work during the day. The childcare program stemmed from a needs assessment from which the staff realized the additional burden childrearing placed on mothers attempting to enter
18

As prescribed by the Andhra Pradesh Government Mutually Aided Cooperative Societies Act of 1995, Womens Cooperative members must be recruited from those households living below the poverty line. Additionally, they must either be farmers, landless laborers, artisans, or fisher people and must have a perfect track record of savings with their womens association.

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the economy. The women were often unable to simultaneously work in the fields and look after several young children, especially when illness hit the family. This was a vicious cycle, as a sick child kept the mother at home and prevented her from earning vital income, while a loss of income resulted in less food and increased sickness.

Prem Sangam developed its first childcare center for approximately 30 children and each day, a different mother would come in to cook and care for all the children. As Prem Sangam had few resources to maintain this service, they asked each woman in the sangam to put aside a small amount of their own grains for the children. We started with just a handful of rice, which is more or less [enough] food for 30 children. That [promoted] the potential for saving and credit opportunities (Patel 2003).

The childcare program is significant for two important reasons. First, it is illustrative of Prem Sangams ability to tailor its services to the needs of its clients. A key critique of blueprint SHG replications is that they do little or nothing to innovate or search for improved ways of meeting the needs of the poor for financial services. Clearly, this is not the case with Prem Sangams model. Second, the childcare program is significant in that it not only affords women the freedom to work without having to simultaneously care for their children, but that

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is simulates a model of collective savings, thus reinforcing the lending model of the Sangam.

Staff Relationships Although Prem Sangam began with only four staff members, its staff has grown to 126 members, and Patel reports that there is an astounding zero percent turnover. However, only a startling 38% of its staff are women. This is a common challenge for MFIs, often due to educational or cultural restrictions, however in Andhra Pradesh where education rates for women and girls are higher on average than northern states, this was surprising. However, several staff members are former clients or children of former clients, which portends well for the organizations legitimacy. Prem Sangams organizational chart has intentionally been built to include checks and balances. Regular reporting is required annually, quarterly, monthly and daily. In addition, each staff member writes a daily log of activities which is supplied to his or her superior for more lateral coordination within the organization.

The organization has regular informal contact with the local community daily and because of this, enjoys great legitimacy within the community. Walking through the village with Patel, it was clear that he was well respected and approachable. The program coordinators are in almost all the villages daily, so clients are able to

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come to them with any problems. As Patel stated, the philosophy is, the administration must be community-centered and controlled.The government is pressuring us to expand our operations, but if I expand my operation to other states, then it becomes more difficult to control. Given this governance philosophy, Prem Sangam has not experienced any conflicts with its clients, although they have, at times, experienced conflicts with the government, donors and from within the organization.

In addition to conducting periodic needs assessments, Prem Sangam readily approves and uses the Participatory Rural Appraisal (PRA) methodology to collect information at open meetings as well as village site visits. When a new womens sangam is formed, the staff visit the village to look at the particular needs and interests of that group of women and their families. The sangam is asked to develop a ten year, five year, and one year plan to outline and meet its goals. The staff of Prem Sangam then sit down with the women to review the plan and set a timeline for review of their progress, usually every three months and again annually. According to Patel, If we are not meeting the requests of these women and these villages, we look at the reasons. And every year, I go to each of the villages with them (Patel 2003).

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Within the first few years of introducing its microfinance program, women from the participating villages saved between Rs. 3 -10 per month, which was combined to form a revolving fund. The revolving fund was used to provide interest free loans to the sangams and Mahila Mandals (womens associations), a collective of sangams within a village, to promote income generation opportunities. The revolving fund was significant to Prem Sangam in terms of solidarity among women in the region and support among its clients, however capacity grew so quickly that the fund became too small to meet loan requirements. There were long waits between loan phases and loan sizes were restricted to a maximum of Rs. 500, not enough to make an appreciable increase in monthly income if an average water buffalo cost approximately Rs. 3000. As the individual earning power of the rural women was low, they were unable to increase their savings contribution. In order to secure the capital necessary to meet the villagers financial requirements, Prem Sangam decided to form a public-private partnership by reaching out to the formal banking sector. They met with officials of two state banks and a representative from Indias National Bank for Agriculture and Rural Development (NABARD), a national program to facilitate microfinance in India. The banks agreed to finance the loans with or without the assistance of NABARD and, in 1993, the first loan for Rs. 870,000 was released to Prem Sangam. Neither

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NABARD nor the Reserve Bank of India required a collateral deposit, however the local banks demanded nearly Rs. 300,000 of the womens saving. From this point on, capital left the communities in the form of interest payments to the banks and to NABARD.

Prem Sangam and its mahila mandals were pleased to have finally been accepted by these formal banking institutions who had, until 1993, considered them unbankable. Prem Sangam envisioned its new relationship with the formal financial sector as a full working partnership. The women committed themselves to building their capacity by saving consistently and repaying their loans in a timely fashion. Prem Sangams plan was to establish the womens sangams as credit worthy and consolidate their relationship with the banks to the point where Prem Sangam, as the intermediary, could gradually withdraw and let the mahila mandals maintain their own relationships with the banks.19 The sangams fulfilled the terms and conditions of the banks and NABARD, however the banks fell short of their responsibilities. Each loan phase had new conditions introduced without explanation or justification, and the banks response to loan requests took an interminable time. The women were required to place their loan request at least six months ahead of their demand. Given the fluctuation in their income levels
This practice is sometimes referred to as gradual evolution, in which a community solidifies its relationship with the formal banking sector and slowly withdraws from the protective umbrella of the NGO.
19

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due to sickness, weather, and natural disasters, this was hardly responsive to their needs.

Prem Sangam became concerned that the true beneficiaries of the banking partnership were not the community members, but NABARD and the local banks. NABARD was earning 6.5% interest per annum on each loan phase, and the banks were acquiring 5.5% plus 0.5% interest tax. Furthermore, Prem Sangam realized that the mahila mandals were slowly but surely moving away from autonomy and relying more on outside financial agencies. Prem Sangam believed the formal banking sector was an il-fit for its clients, and decided instead to bypass NABARD and the banks by developing a community-based financial institution. Known colloquially as the Womens Bank, this financial institution was officially inaugurated in 1996 with a share capital of Rs. 500,000. Each member purchased ten shares at Rs. 10 per share. After fully repaying any outstanding loans from previous loans, every women belonging to a sangam was welcomed to become a shareholder in the Womens Bank.

Donor Relationships Prem Sangam currently works with only two donors to support its programs; a private foundation in Germany, and a Canadian cooperative association. As Patel stated, I dont want to work with too many funding agencies. Patel reported that

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the donors reporting systems are comfortable and that Prem Sangam relies upon a PPM Project Partner Matrix - to be clear about goals and outcomes. We already collect the information they ask of us, so this information is basic.

When asked if there is important information that the donors do not ask for, Patel responded that it was difficult to quantify the effects of Prem Sangams programs. There is not only one side of the programfor example, today we will goto a dam in the village. It was Rs. 23 lakh to make. The multiplication of the affect per capita is more than Rs. 20 million. The crops, the land value has increased, the fish and even the lotus flowers, those are impacts you cannot quantify for a funder. They will see only acres of land, or water. The things we submit are strong recommendations to continue the funding. But the partner must know my problems. Likewise, I also support my partner organization. I must know what they need and expect from me. Patels response points to an important issue about intercultural communication between donors and organizations; a confusion of tongues or the ability of the donors and staff to talk past each other. In this case, the confusion stems from the model, because financial statements do not inform questions about performance.

Patel identified Prem Sangams clients (farmers, day laborers, dobi wallas, etc.) as their most important stakeholders, however when asked whose approval was most

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critical in implementing its programs, he immediately thought of the organizations first donors its first donor, Heifer International. Prem Sangam worked with Heifer International for seven years until Heifers funding priorities changed and Andhra Pradesh was no longer considered a critical area for development. The Heifer Foundation was the only donor with whom Prem Sangam has worked that asked the organization to change its program to better fit their needs. However, Patel reported that other funders who have long supported programs in Andhra Pradesh have been following this trend as well. It is a catch22 for these NGOs; as poverty rates decrease, so does funding for poverty alleviation programs and organizations.

Despite this setback, Prem Sangam has managed to find new donors, and it has learned from its experience with Heifer how to keep its programs and goals from being donor driven. As Patel noted: We will not change our values or mission for money. We say, These are things we are doing. These are the areas we are working on. Is it possible to work together or not? I dont want to change my philosophy for the funding of an agency. Let us say some funding agency could come and say, let me give you ten million rupees if you develop military weapons.I am not prepared to take that money.If CGAP promised suddenly to give ten million rupees, what is your absorbing capacity? My absorbing capacity today is only 25 million rupees. If suddenly you had a hundred million rupees at a time, you dont know what you are going to do with that money. I know some organizations such as SHARE have done this, and even today, I was not able to get information from

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them on what it is they are doing. They are working with scheduled caste families, so how can they be absorbing so much?

In addition to using PRA with its clients, Prem Sangam also receives feedback from its clients through think-tank discussions with four or five families at a time. Internal feedback is given through daily and monthly progress reports from staff, however clients are also able to give feedback at formal and informal meetings. We ask them what they want, what they need, and they put this into their vision plan, said Patel. We ask them permission even to start a program in their community, to hold a meeting. It is as they wish. Otherwise, it is not a way of helping people. (Patel 2003) Prem Sangams model demonstrates a healthy tolerance for evolution. Once every ten years, the organization reviews and streamlines its mission.

In the state of Andhra Pradesh, there are now an astounding 80,000 SHGs, an enormous boom compared with the handful of SHGs operating in the area when Prem Sangam first opened its doors. This is likely another reason that funders are not as interested in funding Prem Sangams programs as they initially were. There is no clear standard or precedent for interaction between these SHGs, however Prem Sangam has recently come together with a handful of other organizations in Andhra Pradesh to draft a policy for interaction and behavior among SHGs and

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NGOs in the state. Patel did not know how these other organizations are funded or what their program organizational structures look like, but he commented that the GoI continues to promote the development of SHGs regardless of whether they are well-designed or even needed in an area. Patel described them as part of the fever of the 1990s. (Patel 2003)

I asked Patel if Prem Sangam had shifted its programs or structure with the boom of SHGs in the area and the competition for funding. He replied that, We dont believe the SHG concept is the only way to help the poor, or to educate the poor. It isshifting the dependency from A to B to C. Particularly in India, one of the reasons for poverty is dependency. So it does not address that, it does not solve that. The key to eradicating dependency is increasing understanding. I dont agree entirely with their model of womens empowerment. As an NGO, we are mighty, but we cannot give empowerment. That is the reason I say, I support the people to amalgamate, to enjoy their rights. We tell them, You are not a spectator of the constitution; you are part of the constitution.

To a certain extent, Prem Sangams success can be measured by its accomplishments. In 1985, girls did not often venture outside the home. Now, 99% of girls in the district are educated and are going to schools (Patel 2003). Enrollment of both boys and girls in schools has increased, as has voting by women (Patel 2003). Patel described this transition, recalling that, it took three years, but we were able to bring all the women [in sangams] to a common place to

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meet. All the men began to stand around, seeing what is it these women are doing. Today, whenever we are conducting a village meeting with the women, the men say, Go to the meeting. I will take care of the home. I will take care of the chores. I will take care of the children. Because just in a few years, the change is very evident..If the male cannot accept the changes in the family, he cannot survive.

CASE 2: Jaya Sangam (Chennai, Tamil Nadu) Jaya Sangam was formed by a small group of women in an urban area of Chennai (Madras) following a flood in 1978. Its founder and Director, Jaya Singh, then a social worker, realized that poor women living in the slums wanted access to credit, not a handout of free rice. Singh gathered a small group of women who expressed a sense of solidarity with other women struggling in the marketplace, and pooled their resources to extend small loans to 30 women to start or expand their own small businesses (Singh 2003). Through micro loans of 20 to 30 cents, Jaya Sangam expressed a desire to militate the curses of moneylenders that are all over India, and to help women living below the poverty level obtain credit, develop leadership skills, and discover solidarity, courage and a sense of

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their own dignity (Singh 2003). Today, Jaya Sangam owns its own cooperative bank and has more than 225,000 members in nine branches across the three southern states of Tamil Nadu, Andhra Pradesh, and Karnataka, and is considering expanding north into the state of Bihar (Singh 2003, Bangasser 2003, 25).

Within the first year, Jaya Sangam began to produce written materials about their work and became recognized internationally when a graduate student looking at gender and development read these materials and asked if she could write a small booklet about them. The booklet quickly led to international interest, including visits from members of the International Labor Organization (ILO) who were interested in documenting Jaya Sangams results and wanted to conduct studies.

Singh recalled that the organization was initially interested in these evaluations, of learning all they could from independent evaluators. In short time, however, the organization decided they were competent to do their own evaluations. Singh described her rationale for this by stating, if I asked from outside, they give a very different term and a very different evaluationother things that are not a requirement and all that. But what I learned from the womenwe were able to put it on paper, exactly what these women saidYou can see for yourself how [microfinance] can promote growth and the organization can remove

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dependency. In other words, Singh intimated that they did not need to rely upon outside interpretations or evaluations of their progress. Not only did they feel fully competent to evaluate their own work, they felt more adroit at accurately capturing from the women, in their own words, the successes and difficulties with the program.

In time, Jaya Sangam expanded its program to offer additional services to their clients, including vocational and educational training centers for women, cooperatives, health centers (including reproductive health centers), and most recently, child labor rehabilitation programs. Our strategy of organizing women workers began on trade lines, stated Singh, and it strengthened their economic roles using credit as an entry point - for social mobilization. So as the process gained momentum, programs for reproductive health, education, counseling services and these things were evolved by the poor women themselves from their own experiences. (Singh 2003)

Jaya Sangams staff now includes about 450 members; 175 administrative and banking staff members, and the remaining field workers. The staff is 100 percent women. When asked if any staff members were previous clients, Singh replied, Yes, field workers and supervisors. staff may also be daughters of a client. Jaya Sangams stakeholders were identified as primarily scheduled castes (in

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particular dalits and adivasis), as well as staff and public officials. Singh noted that the governor of Tamil Nadu and even Vice-President of India have expressed their appreciation of Jaya Sangams efforts with the scheduled castes.

When I asked for more detailed information about who developed Jaya Sangams programs, Singh replied matter of factly, We all did the women together. This indicates a strong cohesion between staff and clients, and that no greater weight was given to one particular group. It also indicates that outside or donor influence was not a factor in program design. However, questions about whose approval was most critical in implementing the programs indicated that the social stigma surrounding social programs for lower caste women makes it difficult to gain legitimacy from the government (Singh 2003). It took such a very long time, it took such an effort withtaxesbattles with small labor officers, etc. (Singh 2003) In fact, Singh was even arrested for continuing to help her clients without the necessary beurocratic sanctions, a charge which was lifted when government officials realized who the police had arrested.

Jaya Sangam places great emphasis on involving its clients in decision-making. Singh described that, the structure is very, very important because it is the whole set up of the organization. It is important to remember that it is their organization and it is for them that it is going on. Everything is bottom up. If there is a conflict

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with a client or between clients, they have sorted it out themselves.For instance, there was a fight for water, but eventually, the wise women among the group got together and they said, Let us sort it out. (Singh 2003) Singh concluded with an simple and insightful comment. No matter how poor our clients are, they are bankable. At the end of the day, they can manage their own affairs.

Donors Jaya Sangam works with only one donor, as has been the case since 1986. Initially, the organization started with multi-donor programs like other MFIs and NGOs, however Singh expressed that the different donors required that Jaya Sangam meet this objective or that objective. Instead, Singh repeatedly stressed the importance of a partnership with her donor. It is not that you throw away the money [offered by other donors]. But we are asking them to not only give us the money. We are asking them to come to the urban centers, the slums. And the villages. Then they can see the standards of those women, their living and working conditions. For us, if you are going to do that, then you can be a partner. Singh repeatedly emphasized this point; that the organization would not simply take money from anyone who offered it, but rather would ask them to come and see for themselves what they were doing. If you see our management report, said Singh, you will see that out of the 365 days, 200 visitors will be there in a year. Let them come. Let them go to the slums. Let them see for themselves what

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we are asking them to do. This indicates that the organization has decisively chosen to reject any potential strings that may be attached to funding from donors and to maintain a strong sense of control over the organizations mission and program goals.

Jaya Sangams first primary donor was the Ford Foundation, followed by a private donor (Dr. Robert Chambers). They have had single donors since 1986. Their current donor is Citibank, who has funded their programs since 1998, and whom Jaya Sangam refers to as a partner. When asked about donor requirements, Singh responded that most donors have acted and responded as partners, not just donors. By that, she explained that the donors took a personal interest in the womens lives. They spoke directly with the women, asking them questions about their loans, their income form the loans, the amount of time it took them to complete their work, etc. Singh stated that she found their questions to be quite interesting. It tells [the donors] what the women have been doing over the years. They began asking, We would like to know what the women are doing. So in this way, we made the donorsthe partnersbe interested in knowing what the women are doing themselves.

Jaya Sangam has daily contact with its clients and with the local community, and although staff members frequently submit reports on their activities to

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management staff (daily, weekly, bi-weekly, and monthly), they do not need to provide any specialized reports to their donors outside of the normal organizational reporting structure. Singh stated that, There are annual reports, but these are not so much an issue with our partners because they are already knowing what we are doing. When asked if donors required information that is difficult to give them, Singh replied, They dont - because they know that we are highly sensitive and they know that we are doing all of the things we have in our contract. The important thing is, we have spelled out our requirements at the onset with them. Singh gave an example of an instance when a potential donor came to meet with Jaya Sangams coordinators. I met with the coordinators and asked them, Did you approve of the donor? This is very important because in our organization it is not one womans organization. It is every womans organization.

Despite the rosy picture painted by Singh, such a partnership obviously takes hard work. Singh acknowledged minor changes here and there, but emphasized that Jaya Sangam has never had a difficult working relationship with its current partner, Citibank. Of course there is a lot of time working this and that out, going back and forth, said Singh, but we did it. When it comes to the question of [making changes], we always look at the kinds of changes proposed and we talk with ourselves, then we go back to the donor and say, This is what we are going

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to do. Is it agreeable to you or not? Then, after they have seen, after they have come here and submitted their ideas to us, let us see if it is practical. Whatever we formulated thinking over all of these things, it took all of us together.

Such idyllic partnerships were not always possible. In 1996, Jaya Sangams primary donor organization reprioritized its funding areas, leaving Jaya Sangam to find new funding the following fiscal year. Jaya Sangam spent the rest of the year anxiously exploring funding options. Ultimately, the Bank of India came to its rescue until its next donor/partner was secured, and since then, Jaya Sangam has enjoyed solid partnerships.

Relationships with the MFI Sector One need only walk through the slums where Jaya Sangam works to see the capacious lineup of SHGs. When Jaya Sangam was formed, it was the first microfinance SHG of its kind in the area. Seeing so many similar organizations in such close proximity, I asked Singh for an approximation of how many SHGs now operate in Chennai. She could not say how many, possibly hundreds, explaining that Jaya Sangam does not have much contact with the other SHGs. We see them, but we do not have anything to do with them. They are government funded. We do not have to compete with these organizations for

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funding. We are 85% self-sufficient now. In 2005, we will be 100%, said Singh (Singh 2003)

When asked if she believed the rapid expansion of so many SHGs was a positive development for poor women in the area, Singh replied that, those people are actually cheating those women they say they are helping. I think this is the way many of them [the SHGs] work.I think that they should participate in another part of India because there is no education involved.there is no womens leadership at all. So these organizations are going to make use of these women, and then they are going to be cheated. So really, they need a self-help group which can monitor themselves. I wont say that the people should have a man leader. The women should be making the plans and the women should have that role, for a self-help group. In the south especially, we are all educated, and I think these are some of the things that can help the women themselves, if they have control of their own organization. The moneynot the self-control, I thinkis the real, real reason for the organization. Not the womens empowerment. And I will also say that the cooperatives are not very good all over.

When asked if Jaya Sangams programs have shifted or been influenced by the changes in the microfinance sector over the last ten years, Singh explained that each of the programs of the organization, from microfinance to child care, is an

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integrated program to promote the goals of the women. It is not just women who are getting money, explained Singh, but that they are made into a valuable human because our programs are integrated together and they see what they can be. Singhs remarks indicate a strong welfarist leaning in methodology, and reveal that the shift towards the commercialization of microfinance has not been welcomed by the organization. I do not like the approach of commercialization, said Singh, and I think participation is the most important. I cannot always be there. The leaders have to emerge, and they learn what they need to emerge from participation.

Indeed, Singhs continual return to the importance of participation has significant linkages to the emergence of participation as a development tool at the time the organization was first formed. Womens participation in development led to an important change in the relationships between the actors traditionally involved in development, and one of the reasons Jaya Sangam was thought to be so radical. Although the notion that uneducated and illiterate women could contribute anything valuable to development policy was initially discarded by development planners and politicians alike, once a direct correlation was drawn between women and profit, the term seemed to lose its subversive connotation. From ECOSOC to the World Bank, participation became a standard policy measure in effective development strategies, and this acceptance certainly paved the way for

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the widespread acceptance of the model by the Government of India. (Rahnema 1992, 117). Ultimately, however, womens participation in the articulation of their SHGs priorities lies at the heart of Jaya Sangams success, and perhaps points to the failings of the standardized SHGs across India today.

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CHAPTER 5: ANALYSIS & CONCLUSION

To what extent can these two case studies elucidate how the tensions between the competing paradigms of microfinance in India affect the success or failures of MFIs? What can they tell us about the various factors, or combinations of factors, that might explain how these paradigms have influenced MFIs in India? Let us return to the original research question. It was my hypothesis that within the last decade, large development institutions such as CGAP have encouraged a paradigm shift in the mission of MFIs from locally adapted activities promoting empowerment and self-sufficiency for the poorest women to increased financial sustainability and greater outreach to the (lower-risk) moderately poor. With the ephemeral growth of microfinance in India over the last decade has come an increase in funding by international donors, and with that, the risk that donor priorities will influence the mission, programs and strategies of the MFIs they fund (Smillie and Helmich 1999, 4).

The data collected, however, does not seem to support my hypothesis. In fact, the data would suggest that these organizations remain somewhat impervious to the ebbs and tides of the microfinance sector, preferring instead to focus on the needs of their local clients and communities and establishing strong partnerships with their donors. Both MFIs studied, Jaya Sangam and Prem Sangam, revealed an

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unequivocal welfarist inclination in their mission, programs, and policies, which would suggest that they are far less easily influenced by policy from international development institutions than was hypothesized. In both cases, the repeated emphasis of their donor partnerships indicates the MFIs predilection for donors whose policies complement, rather than dictate, their mission.

SECTION 5.1 Hypothesis or Design? What explains why the results of the study differ from those hypothesized? Is the problem with the research design or with the hypothesis? There are various factors and possibilities that may account for these surprising results. Let us assume that the problem is with the design.

The Instrument Perhaps the design of the questionnaire can account for the results. Many of the questions on the questionnaire were designed to gather information about the organizations that may explain why the results were so. For example, organizations were asked about staff turnover, competition, feedback mechanisms for both staff and clients, and how the organizations conduct needs assessment, if at all. These indicators were chosen to determine causality for certain results, for example an answer about high staff turnover or difficulties with accountability

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within the organization may explain why the organization would have trouble securing funding or with its repayment rates. Additionally, by collecting data in person, rather than asking the subjects to simply fill out the questionnaire and return it, other observations and the allowance of more in-depth answers, clarifications, and follow-up questions, the data was enriched.

However, perhaps there were questions missing from the questionnaire that would have shed important light on the study. For example, the subjects could have been asked directly about their opinions of lartge development institutions such as CGAP, the MIX, USAID, or even the World Bank. Likewise, they could have been asked to describe the changes in them microfinance sector from their perspective, and what, if any, role such development institutions may have played in these changes.

The study may also have benefited from additional interviews, either with the organizational directors or other staff, as well as with clients. Given the complexity of human subject consent processes through the Institutional Review Board, however, I opted not to do so. Further, these interviews would have contributed more variables to the study and would likely have altered its qualitative design.

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There may also be methodological limitations with the study. There are a variety of methodological research papers that suggest that there are limitations to a purely quantitative approach as well as to a purely qualitative approach in social science research, be it impact evaluation, poverty assessment, and so forth (Howe & Eisenhart, 1989; Glewwe, 1990; Dudwick, 1995). Each approach is valid, but in many cases, both are required to address different aspects of a problem and to answer questions that other approaches cannot answer well (Car Valho & White, 1997). These are potential limitations, however, and do not necessarily explain why the results of the study differed from the hypothesis.

The Hypothesis On the other hand, perhaps, despite any clear results from these case studies, the survey instrument and methodology were sound and it was the hypothesis that was flawed. Let us assume, then, that the problem was with the hypothesis. There are various explanations that could be account for the results of this study.

1) Large development institutions, such as CGAP, are subject to a certain amount of hype and do not really have the influence their reputation purports to have in the microfinance sector. It is possible that CGAP, the MIX, and other large development institutions, while appearing to hold a great quantity of valuable resources and information about best practices in the industry, are

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not seen to be as valuable by other microfinance practitioners. Perhaps their influence is greatly overstated by their own puffery, and is merely hyped through their own publications. Although CGAP currently publishes the majority of information on microfinance in the world, there is no research or evidence to support their value or influence to MFIs one way or the other. Further, while these institutions they may be respected, their association as large development institutions may create a barrier of local legitimacy.

A number of factors have coalesced to make MFIs such as Prem Sangam and Jaya Sangam important actors in the development arena, particularly because they are able to do what large development institutions such as CGAP cannot. They have strong contacts in the local communities where they work, a greater understanding of the unique cultural environment, and the commitment of their staff. Equally important, particularly in the cases of Prem Sangam and Jaya Sangam, are their clearly articulated organizational values and vision, such as people-centered development, participation, empowerment, and commitment to serve disadvantaged groups.

Charities and aid organizations have, of course, existed in some form or another in India for centuries. Until relatively recently, however, their activities were considered ancillary and basically unrelated to the goals of large-scale

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development. It is only within the last decade that buzzwords such as empowerment and self-reliance brought attention to the importance of MFIs as actors in development and thus, precipitated their adoption by large international development institutions (Riley 2002, 66). Historically, it is somewhat ironic that NGOs in India flourished as the British sought to control the activities of indigenous organizations that were often involved in anti-colonial movements and actually defined them as specifically non governmental. The result, of course, lent credibility to NGOs, and it is perhaps for this reason that MFIs such as Prem Sangam and Jaya Sangam have benefited from such community support and word-of-mouth legitimacy.

While institutions such as CGAP certainly have an important place within the development sector, perhaps they overestimate their own importance or forget that their strength is only achieved through partnership and collaboration with local MFIs. In his book Stakeholders in Rural Development, John Riley describes the partnership between governmental and non-governmental organizations as a critical collaboration (Riley 2002, 15). The same terminology could be extended to describe the collaboration between MFIs and their donors, or MFIs and development institutions. That is, it is the collaboration between these two actors that accounts for their success, rather than one actor individually. The donor or institution provides resources, while the MFI provides legitimacy, in a

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sense, transforming the resources into a magic bullet that can be dispersed throughout local communities. Perhaps the two paradigms of microfinance are meant to work in tandem, not as a replacement but a complement to an MFIs mission.

Both Prem Sangam and Jaya Sangam enjoy strong partnerships with their donors, and rely upon this symbiotic critical collaboration to meet their goals. Their funders are able to provide aid to organizations whose work is seen as legitimate and effective, while the MFIs are able to run their programs and organizations with financial security and little influence from their donors. However, development institutions such as CGAP do not seem to be instrumental, or even relevant actors, in this relationship, suggesting that their influence is overstated.

2) Large development institutions, such as CGAP, do, in fact, influence these organizations in other or more subtle ways that were not measured in this study. Although the results of this study indicate that Prem Sangams and Jaya Sangams own donors do not appear to influence their policies and programs, are they nonetheless affected by the trends of large donors in the microfinance sector, such as CGAP, whose influence may have permeated the microfinance culture in more subtle ways? Or is it possible that the mere involvement of their own donors, as

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foreign funding bodies, nonetheless imparts some influence that may either bolster their credibility or adversely affect their local legitimacy?

That each organization appears to be able to temper the influence of donor agendas in terms of their programs and mission does not necessarily mean that they are impervious to the influence of hegemonic development policies. In fact, one could argue that both Prem Sangam and Jaya Sangam have been influenced by the paradigm shift in microfinance, albeit in an unexpected way.

Prem Sangams early donor experiences with NABARD and the Reserve Bank of India, as well as Heifer International, were extremely formative for the organization. Patel has, since these experiences, declined to work with more than a few donors and has built solid personal relationships with both of his current donors. The reporting systems and performance indicators are comfortable for both the donors and the MFI, but more importantly, the donors trust Prem Sangam to set its own policy and program goals. Prem Sangams legitimacy as an established and stable organization within the community, state, and country are similarly confirmed by its legitimacy on an international scale. Through networking with international researchers, practitioners, and development institutions, it has made a name for itself, albeit within a small microfinance

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niche. And it is through interaction with these actors that Prem Sangam has seen the dangers and failures of the dominant microfinance discourse on other MFIs.

Patels unambiguous statement, We will not change our mission or values for money, is quite telling, as is his observation that the current SHG blueprint model abounding through India is only shifting dependency from A to B to C. It suggests that perhaps the success of Prem Sangam can be attributed to its ability to learn from the failures of these contrasting SHG models and to carefully ensure that its own program design and organizational culture remains intact. That is to say, the influence from CGAP and other development institutions is indeed felt, however rather than internalizing the paradigm shift, Prem Sangam has instead carefully cultivated strong donor partnerships that allow it to remain independent from these trends.

3) The two case study organizations are well established, well respected and do not need to rely upon advice from other institutions or donors. Their demonstrated results and stability within their communities are an indication of the adage, if it aint broke, dont fix it. We know that pressure from donors has encouraged many MFIs to expand their microfinance activities beyond organizational capacity and accept performance criteria that may have the effect

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of marginalizing the tacit knowledge and sensitivities core competencies of NGOs that set MFIs apart from other development institutions. Further, the hegemonic pressure from large development institutions has caused many MFIs to shift their missions from outreach to the poorest and most disadvantaged groups, to those who are lower risk, only moderately poor, and often men (Robinson, 1995; Morduch, 1998; Woolcock 1999). This is not to say that financial performance criteria are not important, but rather that other indicators of organizational values, which are harder to quantify, should be recognized as an equally important component of an MFIs effectiveness.

Both Prem Sangam and Jaya Sangam have expanded and added new programs based on needs assessment, rather than fads within the sector or donor influence. Neither organization began its operations in order to practice microfinance, in contrast to the standardized SHG model, but rather evolved programs for microlending as the need arose among the clients they were serving. Prem Sangam, in fact, did not begin providing microloans until several years after its initial operations. Its primary function was simply to aid poor rural communities in local development projects such as watershed management and agricultural development that would allow greater self-sufficiency for its primarily agrarian communities. Jaya Sangam, likewise, is expanding its programs based on needs

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assessment, including a rehabilitation program for prostitutes in the slum districts, and refuses to let donors dictate program design or goals.

Although Prem Sangams success has generated interest by donors to ask it to increase its program operations to other areas of the state and beyond, Prem Sangam has declined to do so. Patels dedication to careful control and quality over quantity of programs, indicates the organizations ability to make its own determination of organizational direction, irrespective of donor interests.

In a similar sense, Jaya Sangam exhibits the same behavior, although its own experience is somewhat different. Jaya Sangam has received considerable notoriety, within the local community, the state of Tamil Nadu, and from national and international actors. Much of this fame stems from the socio-political activist work of its founder, Jaya Singh, one of the early feminist voices in the area in the late 1960s. Her history within the region, particularly her outspoken demand for womens rights (for example, with the Dowry Prevention Act and the Bigamy Prevention Act) increased the organizations legitimacy simultaneously within the communityespecially with womenand within the government. This has arguably been an important component of Jaya Sangams success, and thus affords it an even greater luxury than Prem Sangam in that it can pick and choose its own donors on its own terms and without much concern for outside influence

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of its policies or programs. Further, Jaya Sangam expects to be completely selfsufficient by the end of 2005, and thus will no longer need to rely on the support of donors at all. In sum, the results suggest that neither organization seems to allow donor-driven influence, be it from international development institutions or their own donors.

4) The two case study organizations were initially formed to address problems that development institutions like the World Bank were perpetuating and, therefore, see such institutions and top-down approaches to poverty alleviation as part of the problem, rather than the solution. Like Prem Sangam, Jaya Sangam is fully aware of the trends within the microfinance sector, and of the models and tautology from CGAP, USAID, and the MIX. Yet neither organization appears to feel pressure to follow suit or shift its mission. In fact, both Singha and Patel expressed some dismay or trepidation with the methodologies and operations of CGAP-driven SHGs in India. Singh went as far as to say that they were cheating women.

In each case, Prem Sangam and Jaya Sangams organizational structure are intentionally designed to place great emphasis on bottom-up decision-making, and they seem to steer clear of outside influence in their mission and policies. With Jaya Sangam in particular, this was somewhat of a surprise, as I originally

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hypothesized that Jaya Sangams larger size, with multiple programs in several states, and larger donorsincluding the ILO, the Ford Foundation, and Citibankwould make it more susceptible to donor influence. However, the results indicate that the influence of microfinance policy from these development institutions is felt, but does not cause mission drift. Instead, Prem Sangam and Jaya Sangam looked at the best practices models touted by development institutions as blueprints of what NOT to do. 5) The two case study organizations are simply too committed to (and busy with) their own activities to pay much attention to, or give much significance to the fads of the development sector. MFIs exist within a complex web of interrelated social, economic, cultural and political surroundings and cannot operate in isolation of other actors in development. The very nature of the mission of MFIs to engender social change for the poor commits them to do what is in the best interest of their clients, and this often necessitates interaction with other actors. However, given the number of clients and programs each organization runs, it stands to reason that accountability to certain stakeholders will trump those of less relevant actors. The nature of serving multiple masters often indicates that one of these receives foremost attention before others. Both Singh and Patel expressed that they were simply too busy with their own operations to

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keep up with the activities of other SHGs, development institutions and conferences.

Logically, the continuing function (and existence) of these MFIs depends on their fulfilling the needs and expectations of multiple stakeholders, particularly to their clients and their funders (Tandon 1996, 55). It is difficult to reconcile the idea of accountability with the seemingly incompatible concept of autonomy. If the organization leans too far towards autonomy, it would end up operating in a sort of vacuum devoid of any outside influence, which is obviously impossible. If it leans to far towards accountability, it would spend all its time conforming to the interests of its stakeholders. The balance between the two extremes is a constant struggle for most organizations, yet in these two cases, one that generally seems to be won over by accountability to clients. In this regard, it stands to reason that a bottom-up approach, in which clients take on the greatest importance, would be in direct contradiction with the policies espoused by CGAP. In that regard, unless a new policy or technology comes about which holds particular interest or benefit to Prem Sangam or Jaya Sangams clients, they simply pay the passing trends little regard.

6) The two case study organizations are anomalies. It is possible that my hypothesis was correct and these case studies are merely anomalies. Perhaps the

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influence of large development institutions is, in fact, far more pervasive than this study reveals, and that most MFIs in India are, in fact experiencing mission-drift. This would certainly explain the propensity of literature, albeit somewhat propagandistic in nature, that points to the successes of MFIs who follow GCAPdriven best practices. Prem Sangam and Jaya Sangam, and perhaps a small handful of MFIs with similar characteristics in terms of years of operation and donor relationships, represent a tiny minority within the microfinance sector. However, what if these are not anomalies? What conclusions can we draw about the changing landscape of the microfinance sector in India?

SECTION 5.2 Conclusions In the thirty years that international development has existed as a discrete field of endeavor, only rarely have the diverse sectors within the field been in general agreement on a major topic. (Dichter 1986)

Within the last decade, large development institutions such as CGAP have encouraged a paradigm shift in the mission of MFIs from locally adapted activities promoting empowerment and self-sufficiency for the poorest women to increased financial sustainability and greater outreach to the (lower-risk) moderately poor. These shifts pose questions as to whether MFIs can continue to

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be effective in their mission to provide locally specific opportunities for empowerment and self-sufficiency to the poorest of the poor, or whether influence within the microfinance sector will undercut their internal management and cause a mission shift.

Both case studies revealed that MFIs can, in fact, successfully manage their programs and achieve their goals without feeling any pressure to change or adapt to the trends within the industry. This study posited that given the complexity and heterogeneity of Indias population, these donor-sponsored best practices would likely affect the microfinance sector differently, however there was some uncertainty how deeply these policies would permeate the mission of MFIs, particularly those that have been rooted in the community prior to the microfinance boom. As the research showed, the influence of these best practices did not appear to have permeated these deeply rooted organizations, contrary to what was expected. Instead, the study found that there were remarkable similarities between the two microfinance organizations. Both expressed their relationships with funders as partnerships, and neither organization felt that their donors dictated or influenced policy or organizational mission. Both MFIs were satisfied with their mission, objectives and growth. Most importantly, both organizations adhered to their own, bottom-up approach to their objectives, which obviated the need to keep one eye on the microfinance sector and instead allowed

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them to learn from them mistakes of other MFIs who followed the dominant microfinance discourse.

Poverty is complex, varied, and multidimensional making its removal dependent on myriad factors. The rush to implement best practices, irrespective of these complexities and variations, should be tempered with caution. It is this researchers conclusion that it would be a mistake to apply a blueprint one-sizefits-all approach to poverty alleviation that cannot be tailored to local social, political, economic and environmental nuances (Riley 2002, 73). We should start, in the words of Christopher Dunford, with the market we seek to serve the very poor rather than with the product we have to sell or the institutions we have built to sell it (Dunford 1998). The overall objective should be to tailor lending methodologies and appropriately so that they best serve the needs of the local communities and clients, not those of institutions or donors.

The examination of Prem Sangam and Jaya Sangam draws out important lessons that are linked to broad academic debates about development theory. Given the complexity of the microfinance debates, there remain myriad avenues for further research.

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Figure 2. Map of India

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Appendix A: Questionnaire Instrument

Questionnaire for Microfinance and Self-Help Organizations in India

INTRODUCTORY QUESTIONS Participant Name: ___________________________________________ Participant Title: ___________________________________________ Participant Organization:________________________________________ SECTION A: ABOUT YOUR ORGANIZATION 1. What is the name of your organization and how did you select this name? 2. What year did your organization begin working in India? 3. What is your mission statement and who developed it? 4. How many programs does your organization have and where are they located? 5. Who do the programs serve? 6. How long have you been running each program? For internal reference: ___ Mission Statement ___ Annual Report SECTION B: ORGANIZATIONAL STRUCTURE 1. How many staff work with your organization? 2. How many staff members are women? 3. Are any staff members previous clients? 4. Who are the stakeholders in your organization and community? 5. Who developed the programs your organization runs? 6. Whose approval was most critical in implementing your project? Why? 7. Do staff members need to submit reports on their activities? If so, what do these reports include?

8. Does your organization need to submit reports to other organizations or donors? If so, what do these reports include and how often must they be submitted? For internal reference: ___ Organizational Chart ___ Report of Activity SECTION C: COMMUNITY & CLIENTS 1. How often does your organization have contact with the clients it serves? 2. How often does your organization have informal contact with the local community? 3. What steps has your organization taken to promote participation in its credit-lending programs? 4. Has your organization taken any steps to involve your clients in decision making? 5. Have you ever had a conflict with a client and if so, how did you handle it? 6. Have you conducted needs assessment within the community? For internal reference: ___ Workshops ___ Surveys ___ Needs assessment ___ Interviews ___ PRA ___Oral Histories ___ Public Meetings ___ Site Observation ___ Sangam Meetings ___ Other SECTION D: DONORS 1. How many donors does your organization have? (i.e. International aid agencies, foundations, NGOs within India, NABARD, private donors, etc.) 2. Who are the primary donors? 3. What kind of reporting requirements do these donors have? What information do they ask for? 4. Do you feel that these reports ask for information that is difficult to give them? 5. Do you feel that there is important information that the donors do not ask for? (If so, what is it?) 6. Has a donor ever visited your organization to observe or assess it?

161

8. Have you ever had to change your program to better fit donor needs? SECTION E: MICROFINANCE SECTOR IN INDIA 1. How many other microfinance organizations or SHGs are currently operating in your area? 2. How many microfinance organizations or SHGs were operating in your area when your organization was formed? 3. How much contact do you have with these organizations? 4. Where does their primary funding come from? 5. Do you feel that you have to compete with these organizations for funding? 6. How do you feel that newer microfinance organizations or SHGs compare in their own programs to the programs your organization operates? SECTION F: FEEDBACK 1. How does your organization receive feedback from its clients? 2. Is there a procedure for clients or community members to report grievances? 3. How does your organization receive feedback from its staff? 4. How does your organization hold the staff accountable? (i.e. observations, reporting, client feedback, etc.) 5. Do clients influence the design of your programs? If so, how? 6. Do donors or potential donors influence the design of your programs? If so, how? 7. Do you feel that your programs have shifted with the changes in the microfinance sector over the last ten years? If so, why? 8. How do you see your organization changing in the next few years?

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Appendix B: Prem Sangam Interview

Questionnaire for Microfinance and Self-Help Organizations in India

INTRODUCTORY QUESTIONS Participant Name: Participant Title: Participant Organization: Prem Patel (pseudonym) Executive Director Prem Sangam (Andhra Pradesh)

SECTION A: ABOUT YOUR ORGANIZATION 1. What is the name of your organization and how did you select this name? [omitted for identification purposes] 2. What year did your organization begin working in India? 1981, Nov. 5. 3. What is your mission statement and who developed it? Actually, a group of [promoters] started the organization and the vision of the organization. We broadly discussed what we are going to do. Because during those days we are also not having very much success with resources. Many things [inaudible] including local government officials. Finally we identified four critical areas. During the social and political severity of those areas, we enlarged other parts of the area, and we set up a vision. 4. How many programs does your organization have and where are they located? All clients are not just in Yellamanchilli. Actually, we started with just four villages. Today we are in 185 villages. Spread out over a 100 km radius.

163

5. Who do the programs serve? Broadly, we want to support socio-economic advancement of the people. The concept we adopted. The government approved it, and then we started [inaudible]. After discussion, lot of most representations of the society, then finally we convinced that women is the best entry. As an educator. Through her, to her family. A few families come here. And one important thing: we are not at all we want to work only with the poor. Because, we dont want to interfere in the name of empowerment or anything. We dont want to interfere in their personal matters, like caste or anything. We dont know the real depth of religion and the real depth of the caste. We dont want to touch that kind of sensitive issues. (Q: Do you have a policy on working only with the poorest of the poor?) Actually we are taking the whole socio-economic situation. And particularly, it has taken us 6 or 7 months to convince the people [inaudible]. So we used to work with women the group, with women economic sangams. So women sangams is an educator to us. So through the womens sangams, we used to take different kinds of issues, surveys and others. (Q: Do you have other programs in addition to the sangams?) We are also having a program for children 3 to 5 years. Children who are not going to schools. Generally most of those children are belonging to working poor women. And you know, most of those mothers prefer to keep the children at home with nobody bothering them. So that is the position of the women that I will take care of the family and we could not get access. So then we started taking children age 3 to 5 years. We contacted a culture and every mother would come in to the center. We had about 30 children. So then, each day one mother would come in and cook for all the children. So that is a social concept. And by that time we are not having any financial resources. Then we requested the women to contact the group for grains. We used to start with just a handful of rice. Which is more or less the condition for preparing food for 30 children. That is the basic to promote the potential for saving and credit opportunities. 6. How long have you been running each program?

164

SECTION B: ORGANIZATIONAL STRUCTURE 1. How many staff work with your organization? Right now about 126 people. (Began with 4) 2. How many staff members are women? About 38% are women. 3. Are any staff members previous clients? A few. Some of the sangam presidents are [inaudible] political power. 4. Who are the stakeholders in your organization and community? Presently the farmers are the main stakeholders. But also other persons such as day laborers and the washer man. We are giving the most important part to the lady. 5. Who developed the programs your organization runs? 6. Whose approval was most critical in implementing your project? Why? My first donor agency was Heifer International. We were receiving about 80,000 Rs in those days. [inaudible monkey outside the window] particularly because of the angle of many other programs. So we worked with them for about 7 years. But then their area of priority changed. So our state was not anymore of their placement area. I have not placed any problems with the U.S. but there are a lot of unsolicited {inaudible] from the union office. You know, a lot of beurocratic problems, red tape, and even some [inaudible staff member chasing away monkey with stick]. 7. Do staff members need to submit reports on their activities? If so, what do these reports include?

165

As an organization, we developed checks and balances. Especially for long term programs. So we know what we are going to do. What are the areas. What are the villages. Who are the leaders. What are the responsibilities. So an annual plan will be given to the various [inaudible]. And reports are taken annually, quarterly, monthly and daily. Every staff member writes a daily saying what is his task of the day. He keeps one copy and the other copy goes to the coordinator. The staff have subcommittee meetings once in 15 days. The program coordinators meet every 2 weeks. So the person taking power will discharged on a quarterly basis. They used to stay at least 29 days to take my final [inaudible]. But nowadays, they are decentralized. They know what they are going to do. They take leadership, which is already approved by the board. Sometime, there is some critical policy letters and things and they get that. 8. Does your organization need to submit reports to other organizations or donors? If so, what do these reports include and how often must they be submitted? We used to submit our progress report once in a half year and financial statements. A statement of accounts. And donor officials used to visit once every year and spend about 5 or 6 days. And they would also review our information for post-funding evaluation. SECTION C: COMMUNITY & CLIENTS 1. How often does your organization have contact with the clients it serves? One staff member covers five villages. So Monday through Friday. And on Saturday she will review. 2. How often does your organization have informal contact with the local community? The clients are not isolated because the program coordinators are there in almost all the villages.

166

3. What steps has your organization taken to promote participation in its credit-lending programs? Yes initially we presented to a number of the villages. We started with 13 surrounding villages. Soon that doubled. We spread from village to village, then we were at 90. Then that doubled. So the whole idea is, weve go tot promote community based organizations. The questions were not many because we were always an NGO. So we are concentrating on expanding the womens groups in the villages. For over a year we did this. So this is the way we are promoting this, woman to woman, village to village. 4. Has your organization taken any steps to involve your clients in decision making? The philosophy is, the administration must be community-centered and controlled. With the management responsibilities, it is four or five hours to a particular area. The government is pressuring us to expand our operations, but if I expand my operation to other states, then it becomes more difficult to control. Examples of womens projects include mostly livestock management. Mostly with water buffalo. Because, maybe you have observed when traveling here, we depend mostly on seasonal weather. Not so much agriculture. But the people already have experience with buffalos. So we supported the very first buffalo management programs. Small initiatives. Some do handicrafts as well. Now some have expanded into water management and land issues. Sanitation and draining. Today our approaches are changing. We are looking more long term at sustainable development. We are concentrating more broadly on natural resources management. Land, water, trees. All of these things the community needs. These are the three main sector programs. 5. Have you ever had a conflict with a client and if so, how did you handle it? We have not really had any conflicts with clients, but we have had too many times conflicts with the government, conflicts with police, inner conflict even. Not with clients.

167

6. Have you conducted needs assessment within the community? Yes with annual meetings and now I am keeping the records of all my 1800 families to chart how their lifestyle has improved year by year. Going up? Or going down? Still, I can never each all 185 villages. I do not see every families situation for myself. So now we are designing a way to see, what happened to the family. We used to collect this information at an open meeting using PRA. Now we do this on visits as well. So whenever we form a new womens sangam, the staff goes to the village and we discussed how it is in the particular sangam. We ask what are your plans for ten years? 5 years? 3 years? 1 year? Then, they think and they say, yes, we want a daycare center, yes, we want to start a business, we want to take care of some debt. Each sangam develops a 10 year or five year plan. We look at those answers and those statistics once every three months. After one year, we sit together and look at percentages. If we are not meeting the requests of these women and these villages, what are the reasons. Sometimes, we look at next years plans and add the leftover to next years. Every year, from my own personal experience, tell my staff they are doing a good job. Then, I say I wish to go to the villages with them. You know in India, the women generally never go outside. So if it is a sangam, I go with a staff member who is a lady. It took three years, but we were able to bring all the women to a common place. All the men began to stand around, seeing what is it these women are doing. Today, whenever we are conducting a village meeting with the women, the men say, Go to the meeting. I will take care of the home, I will take care of the chores, I will take care of the children. Because just in a few years, the change is very evident. Because if the male cannot accept the changes in the family, he cannot survive. SECTION D: DONORS 1. How many donors does your organization have? (i.e. International aid agencies, foundations, NGOs within India, NABARD, private donors, etc.)

168

Right now there are two. I dont want to work with too many funding agencies. 2. Who are the primary donors? One is a private foundation in Bonn, Germany, and the other is a Canadian cooperative association. We are considering negotiating with some in Bangkok and two American foundations as well. We are trying to develop the capacities of women in the NGO, shifting our institutional approach a bit. 3. What kind of reporting requirements do these donors have? What information do they ask for? Their reporting systems are not too much critical. Once they approve the funding, it is fine. In my case, to convince my partner funding agency, there is no problem 4. Do you feel that these reports ask for information that is difficult to give them? No. There is a PPM Project Partner Matrix. So they are clear with us. We already collect the information they ask of us, so this information is basic. 5. Do you feel that there is important information that the donors do not ask for? (If so, what is it?) Yes, well there is not only on side of the programfor example, today we will go outside and I will take you to a dam in the village. It is 23 lakh Rs. to make. The multiplication of the affect per capita is more than 20 million Rs. The crops, the land value has increased, the fish and even the lotus flowers, those are impacts you cannot quantify for a funder. They will see only acres of land, or aqua. The things we submit are strong recommendations to continue the funding. But the partner must know my problems. Likewise, I also support my partner organization. I must know what they need and expect from me.

169

6. Has a donor ever visited your organization to observe or assess it? Yes. 7. Have you ever had to change your program to better fit donor needs? Yes, with the Heifer Foundation. Not with the others. But there are problems with other funders who has been supporting programs in Andhra from 1987 to 2000. Suddenly shifted their goals and decided not to fund any more in Andhra. Now they are not much concentrating here, but every other state in the south. SECTION E: MICROFINANCE SECTOR IN INDIA 1. How many other microfinance organizations or SHGs are currently operating in your area? No. We do not want to develop any conflict. In AP there are 80,000. 2. How many microfinance organizations or SHGs were operating in your area when your organization was formed? No, staff turnover is 0%. 3. How much contact do you have with these organizations? Actually, there is no clear policy. In the last three months, we are creating a draft policy for NGOs. Thirteen organizations are working on this. I am one of the members of the draft committee. 4. Where does their primary funding come from? Dont know. 5. Do you feel that you have to compete with these organizations for funding?

170

Development is a process. You have to sell my product in the market. Now many are talking too much about the Grameen Foundation, the Grameen Bank. Looking at Mohammed Yunus. 6. How do you feel that newer microfinance organizations or SHGs compare in their own programs to the programs your organization operates? All the groups are not SHGs. But the government is promoting self-help groups. Dowcra programs, they are called. Today, there is about 1.5 million DOWCRA groups just in AP. I dont think they are well created organizations. SECTION F: FEEDBACK 1. How does your organization receive feedback from its clients? Yes, we have think-tank discussions sometimes. Four or five families come together. That is their organizational need. 2. Is there a procedure for clients or community members to report grievances? For both me and my staff members, They are not just working on one particular process. There are formal systems that tells clients what they are doing during meetings. We are a responsible organization, to our clients. If anything is wrong, they can say that and it will all go into the report. 3. How does your organization receive feedback from its staff? Meetings. 4. How does your organization hold the staff accountable? (i.e. observations, reporting, client feedback, etc.) With meetings informally, formally - checks and balances. We talk very often and report any problems.

171

5. Do clients influence the design of your programs? If so, how? Yes, they can give feedback at meetings. And we ask them what they want, what they need, and they put this into their vision plan. We ask them permission to even start a program in their community, to hold a meeting. It is as they wish. Otherwise, it is not a way of helping the people. 6. Do donors or potential donors influence the design of your programs? If so, how? We will not change our values or mission for money. We say, these are things we are doing. These are the areas we are working on. Is it possible to work together or not? I dont want to change my philosophy for the funding of an agency. Let us say some funding agency could come and say, let me give you ten million rupees if you can develop military weapons or something like this.I am not prepared to take that money. I know some agencies, even in Andhra, initially started as an NGO but then they started NBFCs and failed, and eventually came back again to their own area, but we are not monkeys. Who asked for this? If CGAP promised suddenly to give ten million rupees, what is your absorbing capacity? My absorbing capacity today is only 25 million rupees. If suddenly you had a hundred million rupees at a time, you dont know what you are going to do with that money. I know some organizations such as SHARE have done this, and even today, I was not able to get information from them on what it is they are doing. They are working with scheduled caste families, so how can they be absorbing so much? In 1991-1999, our repayment was 96%. Today, that came down to 63%. We are not able to identify or rectify our approaches. If Mohammed Yunus can suggest a way, I am interested. Because actually, the Grameen repayment rate is very low. Only about 40% in the end. They only sell success stories. Of course, in some villages, our organization is not needed any more. This is our goal. They are learning something from our services. To remove obstacles to independence. That is our success.

172

7. Do you feel that your programs have shifted with the changes in the microfinance sector over the last ten years? If so, why? We dont believe the SHG concept is the only way to help the poor, or to educate the poor. It is some sort of what I realize is shifting the dependency from A to B to C leaders. Particularly in India, one of the reasons for poverty is dependency. So it does not address that, it does not solve that. The key to eradicating dependency is increasing understanding. I dont agree entirely with their model of women empowerment. As an NGO, we are mighty, but we cannot give empowerment. That is the reason I say, I support the people to amalgamate, to enjoy their rights. We tell them, you are not a spectator of the constitution, you are part of the constitution. SHGs are part of the fever of the 1990s. But one thing I can tell you about the influence of programs, at least in my own area. In 1985, girl children did not come outside the home. Now, 99% girls are educated and going to schools. Even in the villages. So the enrollment of children is increased. And voting has increased also. So that is one very good situation. 8. How do you see your organization changing in the next few years? The vision is evolution. It is a continuing process. Once every ten years we are streamlining our mission. There is too much provisionalism in NGOs and not good management of resources or cash-flow management. So we are aware of these things. So every ten years, we must check our operations and programs and shift. But we are not like the Rotary Club, or like the Red Cross. We are working in villages in Andhra Pradesh.

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Appendix C: Jaya Sangam Questionnaire

Questionnaire for Microfinance and Self-Help Organizations in India

INTRODUCTORY QUESTIONS Participant Name: Participant Title: Participant Organization: Jaya Singh (pseudonym) Executive Director Jaya Sangam (Tamil Nadu)

SECTION A: ABOUT YOUR ORGANIZATION 1. What is the name of your organization and how did you select this name? [omitted for identification purposes] 2. What year did your organization begin working in India? 1981, Nov. 5. 3. What is your mission statement and who developed it? Actually, a group of [promoters] started the organization and the vision of the organization. We broadly discussed what we are going to do. Because during those days we are also not having very much success with resources. Many things [inaudible] including local government officials. Finally we identified four critical areas. During the social and political severity of those areas, we enlarged other parts of the area, and we set up a vision. 4. How many programs does your organization have and where are they located? All clients are not just in Yellamanchilli. Actually, we started with just four villages. Today we are in 185 villages. Spread out over a 100 km radius.

174

5. Who do the programs serve? Broadly, we want to support socio-economic advancement of the people. The concept we adopted. The government approved it, and then we started [inaudible]. After discussion, lot of most representations of the society, then finally we convinced that women is the best entry. As an educator. Through her, to her family. A few families come here. And one important thing: we are not at all we want to work only with the poor. Because, we dont want to interfere in the name of empowerment or anything. We dont want to interfere in their personal matters, like caste or anything. We dont know the real depth of religion and the real depth of the caste. We dont want to touch that kind of sensitive issues. (Q: Do you have a policy on working only with the poorest of the poor?) Actually we are taking the whole socio-economic situation. And particularly, it has taken us 6 or 7 months to convince the people [inaudible]. So we used to work with women the group, with women economic sangams. So women sangams is an educator to us. So through the womens sangams, we used to take different kinds of issues, surveys and others. (Q: Do you have other programs in addition to the sangams?) We are also having a program for children 3 to 5 years. Children who are not going to schools. Generally most of those children are belonging to working poor women. And you know, most of those mothers prefer to keep the children at home with nobody bothering them. So that is the position of the women that I will take care of the family and we could not get access. So then we started taking children age 3 to 5 years. We contacted a culture and every mother would come in to the center. We had about 30 children. So then, each day one mother would come in and cook for all the children. So that is a social concept. And by that time we are not having any financial resources. Then we requested the women to contact the group for grains. We used to start with just a handful of rice. Which is more or less the condition for preparing food for 30 children. That is the basic to promote the potential for saving and credit opportunities. 6. How long have you been running each program?

175

SECTION B: ORGANIZATIONAL STRUCTURE 1. How many staff work with your organization? Right now about 126 people. (Began with 4) 2. How many staff members are women? About 38% are women. 3. Are any staff members previous clients? A few. Some of the sangam presidents are [inaudible] political power. 4. Who are the stakeholders in your organization and community? Presently the farmers are the main stakeholders. But also other persons such as day laborers and the washer man. We are giving the most important part to the lady. 5. Who developed the programs your organization runs? 6. Whose approval was most critical in implementing your project? Why? My first donor agency was Heifer International. We were receiving about 80,000 Rs in those days. [inaudible monkey outside the window] particularly because of the angle of many other programs. So we worked with them for about 7 years. But then their area of priority changed. So our state was not anymore of their placement area. I have not placed any problems with the U.S. but there are a lot of unsolicited {inaudible] from the union office. You know, a lot of beurocratic problems, red tape, and even some [inaudible staff member chasing away monkey with stick]. 7. Do staff members need to submit reports on their activities? If so, what do these reports include?

176

As an organization, we developed checks and balances. Especially for long term programs. So we know what we are going to do. What are the areas. What are the villages. Who are the leaders. What are the responsibilities. So an annual plan will be given to the various [inaudible]. And reports are taken annually, quarterly, monthly and daily. Every staff member writes a daily saying what is his task of the day. He keeps one copy and the other copy goes to the coordinator. The staff have subcommittee meetings once in 15 days. The program coordinators meet every 2 weeks. So the person taking power will discharged on a quarterly basis. They used to stay at least 29 days to take my final [inaudible]. But nowadays, they are decentralized. They know what they are going to do. They take leadership, which is already approved by the board. Sometime, there is some critical policy letters and things and they get that. 8. Does your organization need to submit reports to other organizations or donors? If so, what do these reports include and how often must they be submitted? We used to submit our progress report once in a half year and financial statements. A statement of accounts. And donor officials used to visit once every year and spend about 5 or 6 days. And they would also review our information for post-funding evaluation. SECTION C: COMMUNITY & CLIENTS 1. How often does your organization have contact with the clients it serves? One staff member covers five villages. So Monday through Friday. And on Saturday she will review. 2. How often does your organization have informal contact with the local community? The clients are not isolated because the program coordinators are there in almost all the villages.

177

3. What steps has your organization taken to promote participation in its credit-lending programs? Yes initially we presented to a number of the villages. We started with 13 surrounding villages. Soon that doubled. We spread from village to village, then we were at 90. Then that doubled. So the whole idea is, weve go tot promote community based organizations. The questions were not many because we were always an NGO. So we are concentrating on expanding the womens groups in the villages. For over a year we did this. So this is the way we are promoting this, woman to woman, village to village. 4. Has your organization taken any steps to involve your clients in decision making? The philosophy is, the administration must be community-centered and controlled. With the management responsibilities, it is four or five hours to a particular area. The government is pressuring us to expand our operations, but if I expand my operation to other states, then it becomes more difficult to control. Examples of womens projects include mostly livestock management. Mostly with water buffalo. Because, maybe you have observed when traveling here, we depend mostly on seasonal weather. Not so much agriculture. But the people already have experience with buffalos. So we supported the very first buffalo management programs. Small initiatives. Some do handicrafts as well. Now some have expanded into water management and land issues. Sanitation and draining. Today our approaches are changing. We are looking more long term at sustainable development. We are concentrating more broadly on natural resources management. Land, water, trees. All of these things the community needs. These are the three main sector programs. 5. Have you ever had a conflict with a client and if so, how did you handle it? We have not really had any conflicts with clients, but we have had too many times conflicts with the government, conflicts with police, inner conflict even. Not with clients.

178

6. Have you conducted needs assessment within the community? Yes with annual meetings and now I am keeping the records of all my 1800 families to chart how their lifestyle has improved year by year. Going up? Or going down? Still, I can never each all 185 villages. I do not see every families situation for myself. So now we are designing a way to see, what happened to the family. We used to collect this information at an open meeting using PRA. Now we do this on visits as well. So whenever we form a new womens sangam, the staff goes to the village and we discussed how it is in the particular sangam. We ask what are your plans for ten years? 5 years? 3 years? 1 year? Then, they think and they say, yes, we want a daycare center, yes, we want to start a business, we want to take care of some debt. Each sangam develops a 10 year or five year plan. We look at those answers and those statistics once every three months. After one year, we sit together and look at percentages. If we are not meeting the requests of these women and these villages, what are the reasons. Sometimes, we look at next years plans and add the leftover to next years. Every year, from my own personal experience, tell my staff they are doing a good job. Then, I say I wish to go to the villages with them. You know in India, the women generally never go outside. So if it is a sangam, I go with a staff member who is a lady. It took three years, but we were able to bring all the women to a common place. All the men began to stand around, seeing what is it these women are doing. Today, whenever we are conducting a village meeting with the women, the men say, Go to the meeting. I will take care of the home, I will take care of the chores, I will take care of the children. Because just in a few years, the change is very evident. Because if the male cannot accept the changes in the family, he cannot survive. SECTION D: DONORS 1. How many donors does your organization have? (i.e. International aid agencies, foundations, NGOs within India, NABARD, private donors, etc.)

179

Right now there are two. I dont want to work with too many funding agencies. 2. Who are the primary donors? One is a private foundation in Bonn, Germany, and the other is a Canadian cooperative association. We are considering negotiating with some in Bangkok and two American foundations as well. We are trying to develop the capacities of women in the NGO, shifting our institutional approach a bit. 3. What kind of reporting requirements do these donors have? What information do they ask for? Their reporting systems are not too much critical. Once they approve the funding, it is fine. In my case, to convince my partner funding agency, there is no problem 4. Do you feel that these reports ask for information that is difficult to give them? No. There is a PPM Project Partner Matrix. So they are clear with us. We already collect the information they ask of us, so this information is basic. 5. Do you feel that there is important information that the donors do not ask for? (If so, what is it?) Yes, well there is not only on side of the programfor example, today we will go outside and I will take you to a dam in the village. It is 23 lakh Rs. to make. The multiplication of the affect per capita is more than 20 million Rs. The crops, the land value has increased, the fish and even the lotus flowers, those are impacts you cannot quantify for a funder. They will see only acres of land, or aqua. The things we submit are strong recommendations to continue the funding. But the partner must know my problems. Likewise, I also support my partner organization. I must know what they need and expect from me.

180

6. Has a donor ever visited your organization to observe or assess it? Yes. 7. Have you ever had to change your program to better fit donor needs? Yes, with the Heifer Foundation. Not with the others. But there are problems with other funders who has been supporting programs in Andhra from 1987 to 2000. Suddenly shifted their goals and decided not to fund any more in Andhra. Now they are not much concentrating here, but every other state in the south. SECTION E: MICROFINANCE SECTOR IN INDIA 1. How many other microfinance organizations or SHGs are currently operating in your area? No. We do not want to develop any conflict. In AP there are 80,000. 2. How many microfinance organizations or SHGs were operating in your area when your organization was formed? No, staff turnover is 0%. 3. How much contact do you have with these organizations? Actually, there is no clear policy. In the last three months, we are creating a draft policy for NGOs. Thirteen organizations are working on this. I am one of the members of the draft committee. 4. Where does their primary funding come from? Dont know. 5. Do you feel that you have to compete with these organizations for funding?

181

Development is a process. You have to sell my product in the market. Now many are talking too much about the Grameen Foundation, the Grameen Bank. Looking at Mohammed Yunus. 6. How do you feel that newer microfinance organizations or SHGs compare in their own programs to the programs your organization operates? All the groups are not SHGs. But the government is promoting self-help groups. Dowcra programs, they are called. Today, there is about 1.5 million DOWCRA groups just in AP. I dont think they are well created organizations. SECTION F: FEEDBACK 1. How does your organization receive feedback from its clients? Yes, we have think-tank discussions sometimes. Four or five families come together. That is their organizational need. 2. Is there a procedure for clients or community members to report grievances? For both me and my staff members, They are not just working on one particular process. There are formal systems that tells clients what they are doing during meetings. We are a responsible organization, to our clients. If anything is wrong, they can say that and it will all go into the report. 3. How does your organization receive feedback from its staff? Meetings. 4. How does your organization hold the staff accountable? (i.e. observations, reporting, client feedback, etc.) With meetings informally, formally - checks and balances. We talk very often and report any problems.

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5. Do clients influence the design of your programs? If so, how? Yes, they can give feedback at meetings. And we ask them what they want, what they need, and they put this into their vision plan. We ask them permission to even start a program in their community, to hold a meeting. It is as they wish. Otherwise, it is not a way of helping the people. 6. Do donors or potential donors influence the design of your programs? If so, how? We will not change our values or mission for money. We say, these are things we are doing. These are the areas we are working on. Is it possible to work together or not? I dont want to change my philosophy for the funding of an agency. Let us say some funding agency could come and say, let me give you ten million rupees if you can develop military weapons or something like this.I am not prepared to take that money. I know some agencies, even in Andhra, initially started as an NGO but then they started NBFCs and failed, and eventually came back again to their own area, but we are not monkeys. Who asked for this? If CGAP promised suddenly to give ten million rupees, what is your absorbing capacity? My absorbing capacity today is only 25 million rupees. If suddenly you had a hundred million rupees at a time, you dont know what you are going to do with that money. I know some organizations such as SHARE have done this, and even today, I was not able to get information from them on what it is they are doing. They are working with scheduled caste families, so how can they be absorbing so much? In 1991-1999, our repayment was 96%. Today, that came down to 63%. We are not able to identify or rectify our approaches. If Mohammed Yunus can suggest a way, I am interested. Because actually, the Grameen repayment rate is very low. Only about 40% in the end. They only sell success stories. Of course, in some villages, our organization is not needed any more. This is our goal. They are learning something from our services. To remove obstacles to independence. That is our success.

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7. Do you feel that your programs have shifted with the changes in the microfinance sector over the last ten years? If so, why? We dont believe the SHG concept is the only way to help the poor, or to educate the poor. It is some sort of what I realize is shifting the dependency from A to B to C leaders. Particularly in India, one of the reasons for poverty is dependency. So it does not address that, it does not solve that. The key to eradicating dependency is increasing understanding. I dont agree entirely with their model of women empowerment. As an NGO, we are mighty, but we cannot give empowerment. That is the reason I say, I support the people to amalgamate, to enjoy their rights. We tell them, you are not a spectator of the constitution, you are part of the constitution. SHGs are part of the fever of the 1990s. But one thing I can tell you about the influence of programs, at least in my own area. In 1985, girl children did not come outside the home. Now, 99% girls are educated and going to schools. Even in the villages. So the enrollment of children is increased. And voting has increased also. So that is one very good situation. 8. How do you see your organization changing in the next few years? The vision is evolution. It is a continuing process. Once every ten years we are streamlining our mission. There is too much provisionalism in NGOs and not good management of resources or cash-flow management. So we are aware of these things. So every ten years, we must check our operations and programs and shift. But we are not like the Rotary Club, or like the Red Cross. We are working in villages in Andhra Pradesh.

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