SEWA Background

SEWA was started as a union of self-employed women in Ahmedabad in 1972. Its main goals were

1. full employment and

2. self-reliance for all its members

According to SEWA all workers who do not have a regular salaried job are self-employed. A majority of workers in India (almost 93%) are self-employed according to this definition. A large percentage of these are women.

SEWA follows a twin strategy of struggle and development - struggle against the various constraints that poor women face, through development that increases their financial independence and increases the number of alternatives available to them.

SEWA seeks to evaluate its impact on the life of its members using the following ten goals as parameters. These goals have been identified over time, as the main concerns of a majority of the SEWA members.

1. Employment for more members

2. Increase in income

3. Adequate food and nutrition

4. Safeguarding health

5. Care of the children of the members

6. Improvement in living/housing conditions

7. Creation of own assets

8. Increase in organisational strength

9. Increase in the workers' capacities as leaders

10. Collective and individual self-reliance

With SEWA as an intermediary, the members started borrowing from banks, but the largely illiterate members of SEWA found it difficult to borrow from nationalized banks and the banks were also not used to dealing with illiterate clients. These problems led to the establishment of the Shri Mahila SEWA Sahakari Bank Ltd. (Sewa Bank), which was registered in May 1974.

The most interesting and relevant feature here is that SEWA Bank is a viable financial venture. Its working capital consists entirely of money contributed by the women and does not ever avail of any grant from any source. SEWA Bank has paid the highest possible dividends to its members from the second year of its existence.

Source: www.sewa.org

SEWA's basic method of solving the problems of the rural and self-employed women is to identify their problems and then formulate intervention strategies.

1. Problem-I - Indebtedness (paying high rate of interest)

   SEWA Bank's Intervention :
   Providing loan for repaying old debts, at a comparatively lower rate of interest

   Results

   • Relieved from debts

   • Increase in real income because of difference in rate of interest

   • A portion of increased real income being saved in SEWA Bank's personal saving account.

2. Problem-II: Borrowed working capital (paying high rate of interest)

   SEWA Bank's Intervention :
   Providing loan for working capital at lower rate of interest.

   Results

   • Increase in real income because of difference in rate of interest

   • Expansion in business and thereby increase in actual income

   • A portion of increased real and actual income being saved in SEWA Bank's personal savings account.

3. Problem-III: Hired equipment (paying rent on equipment)

   SEWA Bank's Intervention :
   Providing loans for buying equipment

   Results

   • Increase in real income because of saving in rent.

   • Asset is created in the name of women

   • A portion of increased real income being saved in SEWA Bank's personal saving account.

4. Problem-IV: Low income level

   SEWA Bank's Intervention :
   Providing loans, facilitating savings and financial counseling

   Results

   • Increase in real income:

     1. by borrowing at a lower rate of interest

     2. by repaying old debts

     3. by borrowing to buy equipment

   • Increased volume of business

   • Interest earned on SEWA Bank's savings account.

5. Problem-V: Assetlessness

   SEWA Bank's Intervention :
   Mortgaged properties relieved and providing loans for buying other assets.

   Results

   • Equipment and tools of trade and other productive assets are in women's name.

   • Bank balance in women's personal bank account.

   • Buying other real property like house or land from SEWA Bank's loans.

6. Problem-VI: Lack of financial planning

   SEWA Bank's Intervention :
   Providing financial counseling

   Results

   • Using own funds rather than borrowed funds

   • Being able to convert savings into investment

   • Being able to survive financial crisis, emergencies etc. through insurance and other financial planning.

To whom does the Bank lend? :
The SEWA Bank works only with poor women and loans are only available for economic activities and not for personal use.

For what purposes does it lend?
At present, the Bank lends to its members in three major areas:

• for working capital

• for buying tools of trade

• for capital investments like a house, a store or work space

What is the method of accepting deposits and lending?

1. The bank employs woman savings mobilizers to encourage women to save with the bank. The mobilizer visits women at their homes or workplaces so that they can easily deposit their savings.

2. When she needs a loan, the applicant usually comes with a reference person, already known to the SEWA Bank, and if it is the woman's first time to the bank, some other family member or friend will also accompany her.

3. Applications for loans are made by the members themselves or through the bank's field staff.

4. The bank scrutinizes and processes the application by carefully reviewing the applicant's income-generating ability, financial status, soundness of working conditions and ability to repay.

5. The information is discussed in a loan committee, which submits its recommendation to the Board.

6. The majority of the loans are unsecured; their approval process takes about one week. If the woman has jewellery to offer as security, a fixed deposit or a mortgage, the approval procedure is shortened and she can get a loan the same day.

7. Once the loan has been approved, the borrower is required to buy 5 per cent of the loan amount in bank shares and to open a savings account if she does not yet have one. Women are encouraged to register their savings account and their assets (such as working tools, house or land) in their own name.

8. Most importantly, there are no subsidies or grants; the Bank borrows and lends at market rates.

How does the Bank enforce repayment?
Around 10 per cent of the women face difficulties in repayment each month. Most repayment problems occur in times of crises. SEWA has learned that providing support at these times rather than harassment strengthens the Bank's image as a friend of the poor and results in better repayment than legal recourse or threats could do. The SEWA Bank is thus flexible in helping a woman reschedule her instalments when these crises occur.

The Bank's high repayment rates indicate that this philosophy is indeed effective.

[Source: Social Change through Voluntary Action Ed: Dantwala, Sethi, Visaria, Sage Publications, 1998]

Access to financial resources not only...

• enables women to earn a higher income and have control over their money

• integrates self-employed women in the economy

• provides adequate shelter and space for production and storage and thereby alleviates their poverty

• enables women to own tools and other means of production

• enables women to upgrade their skills, improve their business and increase their income

but it also ...

• builds self-esteem and self-confidence among women

• improves the health, nutrition and education of the women and their families

• raises the status of the women in their communities

• increases entrepreneurship among the women

• builds individual and collective capital

• promotes assets creation

Source: www.sewa.org

Conclusion

Micro finance has achieved in a few years in developing countries the world over what Governments with entire treasuries at their disposal failed to do. Papers and thesis are being written and conferences and discussions are now being organized. An example is the Micro credit Summit held at Washington DC in February 1997.

The best thing that can be done at this stage for micro finance is

• Create awareness about values, principles, and practice of micro finance

• Assess performance effectively, monitor progress and track good practices and

• Act to widen the reach of micro finance to all low-income households and micro enterprises

Unless the benefits of technology and innovations reach the majority of the population who at present are not being served by any credit delivery system, then this progress and growth are meaningless.