April 23, 2002
Comparative analysis of the MYRADA and SEWA cases, India
Case study of the Finsol workshop
Teresa Cerveau

The comparative analysis of Myrada and SEWA is helped along by:

- A shared socio-cultural context, India, with its specific caste system, which forms the basis of the social affinity groups.
-  They are both NGOs, well-established (+/-30 years), working for underprivileged sectors of society. Both of them are among some of the largest organisations in the country, well-known and accredited. Their group formation activities lie within the framework of the fight against poverty and are part of a national movement supported by NABARD (National Bank for Agriculture and Rural Development), which is very powerful and has extensive presence.

However, the study of their social mediation roles provides rather different and surprising results.

Myrada and SEWA base their groups on pre-existing relations of social affinity in terms of castes and neighbourhoods. They choose to work with underprivileged sectors of society, but do not reach the very poorest.

Myrada, after having tried out various approaches, has finally found one that now seems to be tried and tested, the “Self Help Groups”. It clearly defines the criteria for setting up these groups and capitalises on the support systems that permit them to work properly. The impact in terms of individual and collective social capital seems evident, and the SHGs appear to be on the right track to become self-reliant. Collective initiatives implemented by the groups allow them to work for the improvement to the quality of life of their communities. The federations act as interlocutors and are listened to.

SEWA has created a co-operative bank intended to serve women in rural areas, through SCGs. The model of support is faulty, and the financial products ill-defined and not adapted to clients’ needs. The groups break up, dissolve or are inactive. The members remain as dependent as they were on traditional sources of funding. Neither the groups nor the Associations have any impact on their environment.

The difference seems to rest on three factors: the make-up of the groups, the support given to the groups and the products and services offered.

1- Make-up of the groups

For Myrada, the SHGs have a life of their own and their own raison d’être, and because of this, they are an end in themselves. For this reason, special attention has been paid to identifying them (pre-existing groups with social affinities) and to help them setting up, in particular to help them define their own internal rules. Myrada believes that dealing with this kind of group is more efficient, as employees do not need to spend their whole time sorting out problems and conflicts within the groups.

For SEWA, the SCGs are the precondition for being able to use the services of the bank in rural areas. To begin with, it even advocated the formation of groups of over 50 members, most likely to practise an economy of scale. So no account is taken of the internal group dynamics, or of their identity – they are seen as a vehicle through which to channel support. The groups have therefore not developed any life of their own.

2- Support given to the groups

Myrada has implemented a rotational system of presidency in the groups, of tasks and responsibilities and of group relations with external bodies (such as banks), so that training can benefit a greater number of people and transparency is created within the group and trust is strengthened. Groups also manage their own savings and transform them into credit, which increases ownership, gives training in management and reinforces the social ties among members.

SEWA uses multifunctional employees who are responsible for other SEWA programmes as well as the groups, with the result that they do not in fact take much responsibility at all. Only the leaders are trained. It is noticeable that these leaders also head other SEWA activities, which again leads to a handful of people carrying out numerous functions. This approach tends to give rise to suspicion within the groups and interpersonal conflict. The group plays no part in managing its savings or loans, and such decisions are taken by the bank.

3- Financial products and services

Myrada encourages regular saving within the group and discourages frequent withdrawals. In case of need, and for any item, the member can obtain a loan from the group, according to various models (terms, maturity dates, interest rates) fixed by the internal rules. In critical cases, the group can decide to reschedule the loan. The more established and highly performing SHGs are in direct contact with the bank and can request loans for financing its activities. The system is apparently simple, decentralised and flexible and can be mastered by the people.

SEWA is a co-operative bank with restrictions in line with banking regulations. It initially takes a very conservative approach to savings mobilisation (2 years of regular saving without credit). Its financial management service is not decentralised, so withdrawals are slow and difficult, which has created mistrust and discontent among members. Loans are rationed, and the criteria for access to credit are not clearly pointed out. Members have therefore joined the system in order to gain access to credit and are quickly frustrated. Like many co-operative systems, the few loans given are also destined to consumerism or housing and not to production, which is not very educational. Only the health insurance service appears to have an impact, in times of crisis. From this comparative analysis, we can draw the following conclusions:

· The care taken when identifying groups and following through on their formation is an essential investment that conditions their ability to develop.

· The identity of the group, its own dynamics and its perspectives for self-reliance guarantee the creation of social capital. A group created for any other purpose does not develop social ties.

· In order to strengthen the social ties within the group, it is recommendable to give them a role in the financial management. The more important this role is and the more responsibility it gives, the more social capital it will create.

· The supporting institution must assist by providing the tools and methods that will allow for transparent and participatory management, thereby building and strengthening trust and confidence.

· Giving the groups access to other organisations (banks, Government agencies, etc.) creates social capital.

We do not know the impact of a direct, hands-on approach, such as the one developed by Myrada, on the institution’s perspectives for financial stability, but we can well imagine that they are not very good. We do know that it considers the permanence of the SHGs as the goal to reach, more than its own support activities. This naturally raises the issue of the dilemma between permanence and impact, or between minimalist and integrated approaches when targeting extremely underprivileged sectors of society. SEWA appears to be financially stable.

Complete article in word on the WSSE website