CO-OPERATIVE BASED MICROFINANCE: REALISING THE ECONOMIC VALUE OF SOCIAL CAPITAL

1. CO-OPERATIVE BASED MICROFINANCE: REALISING THE ECONOMIC VALUE OF SOCIAL CAPITAL NAJMUL HODA DIRECTOR-RESEARCH & TRAINING –SAHULAT MICROFINANCE SOCIETY, NEW DELHI RESEARCH SCHOLAR – BIRLA INSTITUTE OF TECHNOLOGY – MESRA 3rd INTERNATIONAL CONFERENCE ON INSTITUTIONAL AND TECHNOLOGICAL ENVIRONMENT FOR MICROFINANCE INDIA HABITAT CENTRE, MAGNOLIA HALL/JANUARY 4-7 2012

2. THE NEED “The poor and the poorest have a right to be serviced affordably, appropriately andaccessibly” (www.endpoverty2015.org)

3. THE WAY a lower profile microfinance industry that keeps its costs as low as possible, expands incrementally and focuses as much on savings services as on loans. (David Hulme 2011)

4. CURRENT PROBLEMS directed mainly towards growth and outreach lack of rigorous analysis of the institutional and incentive features of these institutions and any valid benefit-cost or statistical studies of impacts are also rare (Dichter and Harper 2007). the Diabetes Syndrome mentioned by David Hulme (2011) biased towards women

5. AP PROBLEM (CGAP 2010) Lack of credit discipline, Rapid expansion of credit in highly concentrated markets, Lack of proper incentives for sound underwriting or customer care, Lack of internal controls, Reliance on credit-only services, Dependence on basic bank debt

6. Since a majority of microfinance models work on the same or an altered method of group lending, they suffer from the same systemic problems that have been widely reported.

7. CO-OPERATIVES AS SOLUTION • voluntary basis, • democratically controlled and member-owned, • to variously meet the economic, social, and cultural needs of its members • Can be grouped into federations to offer supervision, liquidity management, refinancing, and/or technical support to the federated cooperatives. • low costs and closeness to their members. • participation embedded in it.

8. BUSINESS CO-OPERATION GROUP EXPERIMENT

9. OBJECTIVES • Feasibility of participatory finance model • Effect on financial literacy • Identifying the issues in co-operative microfinance. • Assess the risk sharing attitude of members. • Understanding the various occupations and scope for improvement in those activities. • Prepare groups which can readily be converted into co-operative branches. • To nurture the practice of saving in the target members. • Nourish the habit of mutual help and understand the principles of solidarity.

10. Main Activities of the GROUP • Mobilisation of deposit and lending for income generating activity. • LEARNING the art of handling of money. • Book keeping and recording of financial transactions. • Collecting periodic information in order to test the hypotheses. • Developing means to add value to existing business activities. BUSINESS LOANS ONLY

11. LOAN LOSS RESERVE • A VOLUNTARY CONTRIBUTION TOWARS LOAN DEFAULTS FOR GENUINE REASONS • ONCE DECIDED THE GROUP FIXED FOR THE DURATION OF STUDY

12. PRESENT STAGE VOLUNTARY CONTRIBUTION LOAN LOSS RESERVE PROFIT FROM BUSINESS PROFIT SHARING LOANS FINAL STAGE

13. IS LOAN LOSS REALLY A MEASURE OF SOCIAL CAPITAL ??

14. RESEARCH DESIGN • PRE-POST STUDY • DESCRIPTIVE • SAMPLE SIZE – 500 GROUPS – 5000 MEMBERS STUDY PERIOD – 6 MONTHS

15. SAMPLE DESIGN MEMBERS • The members shall belong to the selected area. • Homogeneity in income level. • Engagement in any income generating activity. • A minimum daily deposit by each member. PLACES Manageability by the regional Office

16. HYPOTHESES H1 BUSINESS GROUPS LEAD TO REALISNG THE ECONOMIC VALUE OF SOCIAL CAPITAL ?? H2 BUSINESS GROUPS LEAD TO MORE FINANCIAL LITERACY H3 BUSINESS GROUPS LEAD TO IMPROVEMENT IN BUSINESS INCOME H4 BUSINESS GROUPS IMPROVE FINANCIAL INCLUSION

19. NEED YOUR SUGGESTIONS • ON RESEARCH METHODOLOGY • LOAN LOSS RESERVE