Monday, March 31, 2014

Micro Investment Plan (MIP) of SHG

The international standard for the definition of the poor i.e. a household that spends more than one third of its income on food, is followed in India, 95 percent of all households would be considered poor. Every country need inclusive political and economic institution to break out cycle of poverty. The delivery of financial services at an affordable cost to the vast sections of extremely poor and vulnerable group of people is necessity for the development of India.

Plans are useless, but planning is indispensable. — Dwight D. Eisenhower

Budgets help to determine how much money one has, where to invest it, and whether one can achieve your financial goals. As budget is a forecast of all cash sources and expenditures. MIP is a tool for financial planning that can be used for both SHG and its members. Socio Economic Analysis of each SHG is performed as risk is involved in giving loan without any collateral. Format used in TRIPTI can be downloaded here.

Indicative Components/ Seven Steps for preparing a Micro Investment Plan (MIP) :

Step 1-SHG Details Format
Step 2-Members’ socio economic details Format
Step 3-Income and expenditure statement of members Format
Step 4-Listing of Household Investment Plans (for economic, social and household needs) Format
Step 5-Prioritization of Members Format
Step 6-Financing and Rotation Plan Format
Step 7-Terms of Partnership Format

MIPs are promoted under National Rural Livelihood Mission as it helps in better planning to avoid bad loans on behalf of the banks. Micro Investment Plan is prepared with the initiatives of Community Resource Person Strategy in the Project. MIP is used for SHG members where many factors like priority, wealth ranking, Investment in the activity proposed, Loan Amount, Life of Asset, Monthly Incremental Income, Saving Capacity of Household, Installment Amount, No. of Monthly Installment and other entitlement (PDS, Insurance, Pensions, etc) are considered. MIP include plans for investment on asset creation for income generation and household need investments. MIP is assessed at Household level where asset, liabilities, risks, vulnerabilities, entitlements and other expenses are noted down in the detail.

But such detail exercise exists only in theory. Most of the MIP forms had not been filled properly. Activity proposed, No. of installation, Payback amount and signature of President & Secretary is the main focus of Banks. The low income who have been excluded from the financial services of formal institutions lacks financial literacy in most cases. Financial literacy for poor villagers is really important but it doesn't mean training by government officials once in a blue moon. There is always need of Livelihood mission/MFI/NGO to reach and build capacity of SHG members. People need awareness about financial products, fraud activities or else they are mislead and fall to misdeeds of chit fund companies promising high returns; This often end up losing the life time savings.

Let us see a practical example of credit linkage. A SHG demanded nearly 1 Lakh as per their MIP and each member of the SHG deliberately had put Rs 10,000 as the investment capital for the proposed activity. Rs 50000 from the GPLF (Gram Panchayat level Federation of SHG under Livelihood Mission) at a nominal interest rate of 7% was given as loan to SHG. Group divided this money among themselves equally (Rs. 5000) per member. The amount according to their need(proposed activity) will always differ from each member but fairness is maintained through this equal division. Only internal loaning is done among members on the basis of priority. In the case of external loan/grant, this fairness in distribution is always maintained by SHG. So, Priority in lending is a nice theoretical concept. How do a rural manager can change 20 years of what the common wisdom have taught them?

Wednesday, March 19, 2014

Validation and Grading of SHGs

SHGs were formed under Mission Shakti in Odisha. Odisha government started a validation and grading exercise to know SHG status in December 2012. The validation process aimed at confirming the existing status of SHGs, whereas the Gradation Process assessed their eligibility for receiving Revolving Funds.


In an ideal world, Branch Manager/ Representative of Bank, B.D.O/Representative from block and C.D.P.O/Representative from ICDS should visit field and complete the process. This may take from 5-10 days depending on the size of the district. This doesn't happen in the real world  where AWW sits with President/Secretary of SHG for the complete assessment.

DRDA and ICDS Balangir has record of 11097 SHG existing in the district but validation lead to only 7846 functioning groups. Hence, we can easily imagine with these figures, difference SHGs claimed and existing can run in lakhs. Defunct and farzi SHGs form a major part of the numbers claimed by the government.


Grade I and II with A, B and C as three categories of the SHG was the grading format. The format with various criteria is uploaded at Scribd. SHGs having 70% BPL members and passed Grade-I test and categorized as “A” or “B” i.e. Scored more than 60% marks during Grading will only be eligible for Revolving Fund in order of merit as per their scores. The Graded SHGs are assisted under NRLM,as this fund will aim to address the immediate production and consumption needs of members of the SHGs as well as encouraging internal lending practice among the members .

In Non Intensive Block under NRLM, Revolving Fund(RF) of 10,000 or 15,000 depending whether they had already received any prior assistance under any other government scheme. The SHGs who have qualified grade I test but not availed any financial assistance will be provided with revolving fund of ₹.15,000/- in two tranches. In the first tranche ₹.5000/- will be provided and on successful utilization of this amount ₹.10,000/- will be provided to the group directly in 2nd tranche at least after 3 months of receiving 1st tranche. This fund will become a part of their group corpus. The group members can borrow from the group corpus to meet their various needs as decided in the group. However, the groups who have already availed such financial assistance under Mission Shakti or any Govt. programme will not be eligible for 1st tranche and receive only 10,000. I insisted to attach xerox copies of BPL card and Bank Passbook of SHG while working at Bhanjanagar block in Ganjam district. Hence, it created transparency and gives validity to the no. of BPL members by any SHG.


RF/PPIF is distributed in a campaigning mela organized at each block with an objective to sensitize the groups about NRLM. Generally, it is more show of the good work done by the government. In an ideal world, SHG assessment (or rating) should not just be limited to current performance but could also assess credit absorption and repayment capacity. That requires a qualitative information to look for problems faced by each group. It is assumed by government that the SHGs which are found ineligible would be provided hand holding support, to improve their credibility for future assistance. But, there was no staff at field level to do this tedious job. Record keeping at the group level has emerged as a very weak aspect of SHG functioning.

The main problem is that we don't have data on the Life cycle of a SHG. We are unable to understand how many groups are defunct or discontinued so we don’t know the mortality rate of the group. So, the government has no answer of these two questions : What groups worked and what works with groups ?

Wednesday, March 5, 2014

Disaster Management

Disaster Management in Phailin was remarkable in its aspect of losing minimum lives when faced with challenge of massive proportion. India evacuated more than half a million people as massive Cyclone Phailin hit eastern ghats at Odisha and Andhra Pradesh. An early warning and timely actions saved countless lives. Earlier entire nation prays for the well-being of the people of disaster struck zone. Yet never care to plan. Things started changing with 1999 Odisha cyclone. And even world bank blog has put an article on the preparation by Odisha government.

In the case of flood/tsunami/cyclone, torrential rains always play havoc and diseases are rampant due to decaying carcass. The relief center must be equipped with grains, deworming pills, Trampoline sheet, dhoti/lungi with saree, mosquito net, blanket, towel & utensil kitchen as an immediate requirements for the household affected with cyclone. My prior experience on preparation for disaster management was itself a big lesson.

I was posted in Ganjam district with Panchyati Raj Department after one month of cyclone Phailin. I observed that mangroves have lowered the full impact of cyclone in the coastal region. Even 50 km from the coast, the brick mortar schools were partially destroyed by the storms.  On enquiring about the relief work at block level,  I was given brief on the help provided by administration post disaster. There were 33,283 households in Bhanjanagar. They were provided with kerosene oil, jaggery and flattened rice (chuda) of two months supply. 50 kg of grains and Rs 500 were given to each household. Plastic cover roof was in demand more than anything. Ganjam was worst hit by the Phailin and the accounts were horrifying.

There is lack of access to basic resources to sustain livelihood for the community. There must be careful planning with Donor funds coming for rehabilitation. Poor countries have become fighting arena of NGOs on international aid after each disaster. And all the international aid and investment is mostly consumed by INGOs, private companies involved in the relief effort. Even missionary organization pops up for saving the soul of unbelievers post disaster with charity. When disaster strikes, who profits? This is the key question for policy level to eliminate corruption and inefficiencies. No other country in the world has more non-governmental organizations (NGOs) per capita as Haiti. Yet we all know about real face of international relief after 2010 earthquakes. (Source 1 and Source 2).


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This Blog is meant purely as a personal diary of a rural manager in making. It exists to record information, experiences and opinions about various issues encountered in the line of duty. Any person, institution and organization mentioned here doesn't assume any liability for its contents. This is not a deliberate attempt to defame anyone. And if you have actually read all that is written in the blog and aren't mad at me, then thanks for your time and patience !


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