THE “PROMISING PRACTICES” CASE STUDY SERIES:

PROGRAMS, PRODUCTS AND SERVICES SPECIFICALLY DESIGNED TO REACH VERY POOR PEOPLE

Activists for Social Alternatives (ASA), India

Prepared by: Gaamaa Hishigsuren, PhD

Activists for Social Alternatives (ASA) commenced operations in 1986 in Tamil Nadu
state as a facilitating agent to empower the poor dalit women. ASA’s objective is to alleviate
poverty and enhance the standard of living for rural poor women, dalits, landless labourers, small
and marginal farmers on a sustained basis towards achieving a better socio-economic and
political status by meeting their credit and savings needs for income generation activities,
agriculture, and entrepreneurial ventures. After having seen a success in intermediating micro-
financial services as one of its core activities and received a significant demand from the target
poor around Tamil Nadu state, ASA decided to scale up. That is, ASA has set a goal to reach
100,000 members by 2005 and 200,000 members by 2010. More details on the country context
as well as the origin, present status and future goals of ASA are discussed in the next sections.

I. Context

Country socioeconomic overview

According to World Bank, out of a total world population of 6 billion, a total of 1.2
billion people, live on less than $1 per day (World Bank, 2004). The majority of them live in
Asia. Poverty is considered affecting over 40% of the population of South Asia. India alone is
said to host about one third of the world’s poor. 70% of India’s over 1 billion inhabitants live in
rural or semi urban areas. 26% or 260 million people live below the poverty line of $1 per day
(World Bank, 2004). Poverty and rural development remains the number one issue in India.

Government estimates show that over 250 million people are left without proper access to
credit despite a network of 33 thousand rural and semi urban branches of commercial banks, 14
thousand branches of Regional Rural Banks (RRBs) and 92 thousand outlets of cooperatives
(Planet Finance, 2002). The poorest people very often do not comply with the norms that banks
set for accessing credit. They neither have salary certificates nor the required collateral to show
as security against the loan. In India, the poorest citizens access credit mostly through informal
channels such as the village moneylenders who lend at very high interest rates whereby the result
is that the poor therefore remain perennially debt-ridden which ultimately results in them loosing
their dignity.

To date in India, over an estimated 8 million poor people (mostly rural women) benefit
from microfinance services (Chakrabarti, 2004),1 thereby leaving a vast unmet demand for
developing credit, savings and insurance activities which is termed as microfinance services
1
This estimate is based on the outreach of NABARD’s bank linkage program as of 2002. At the time of the
dissertation research, there was no systematic estimation of the number of poor reached by microfinance services,
primarily because there were many non-governmental organizations and small projects whose total microfinance
clients were not reported.
targeted at what is until today referred to as the non-bankable sector. The perpetual dependence
of the rural poor on various informal sources of credit, widespread unemployment, illiteracy and
non-availability of technical support to such households demonstrate the high level of demand
for credit. Estimates of the demand for credit in the rural areas, particularly among the
unorganized workforce and the women vary from at least US$ 3.3 billion on the basis of a
minimum need of US$ 44.4 per family to US$ 11.1 billion (Planet Finance, 2002). The latter
estimate envisages that approximately 75 million households would need microfinance, of whom
60 million families will be in the rural areas while the remaining 15 million families would be in
the urban areas. The annual credit usage by rural households is assumed to be Rs. 6,000 per
household, while for the urban poor households an average of Rs. 9,000 has been estimated. In
addition to the demand for credit, there is demand for other financial services, such as insurance.
The credit estimates indicated above also do not include the requirement of funds for housing.

A rough estimate of the supply of credit to the poor includes about Rs. 97 billion
disbursed by the banks during 1997-98 under various schemes including the government
sponsored poverty alleviation programs (Planet Finance, 2002). Another Rs. 1,37 billion
covering around 100 million families had been disbursed up to September 1998 through SHG
linkage programs and other credit delivery channels of MFIs (Ministry of Finance, 1999). These
data indicate a vast unmet demand for microfinance, and ample scope for growth of different
kinds of MFIs and MF service providers.

Social development in Tamil Nadu

Poverty has been endemic and persistent in Tamil Nadu. The percentage of people below
poverty line declined from mid-1950s to early/mid 1960s, but went up later. From the early
1960s to 1980s, about 50% of Tamil Nadu population was continuously below the poverty line
(Tamilnadu People's Forum for Social Development, 2001). In 1993-1994, Union Planning
Commission estimates, the poverty rate has come down to 35%.

Despite this positive progress, rural and urban disparities persist. While in 1973-1974,
rural poverty (57%) was higher than urban poverty, in 1993-1994, urban poverty (39.8%)
exceeded rural poverty (32.5%). The situation of the urban poor in slums has steadily
deteriorated, leading to serious deprivations and dire lack of basic services in slums. Almost 25%
of urban people in Tamil Nadu live in slums that grow at about 4.5% per annum (Tamilnadu
People's Forum for Social Development, 2001).

According to the Ninth Five Year Plan of Tamil Nadu (1997-2002), Tamil Nadu is an
educationally advanced state with a general literacy rate of 62.66% compared to the national
average of 52.21%. It ranks third among major states with regard to general literacy and in
female literacy rate. However, according to the NSS Organization survey conducted in 1998,
there is disparity due to gender: 80% of the males are literate whereas only 60% of the females
are literate. There is also disparity due to social status of the population. The literacy rate for the
dalit, especially female dalits is lower than the state average: 39.5% for dalits and 29.5% for
dalit women, while the state average is 63%.

Dalits in Tamil Nadu

 In spite of decades of reservations and the government claiming to have spent millions of
rupees for dalit welfare, Tamilnadu (TN) has a poor record of empowerment of dalit
communities. Most of the caste clashes involving dalits, in the recent past in TN are linked to
visible disparities in terms of access to productive resources like land and credit, to the
disadvantage of the dalits.

Dalits, as per the 1991 census, form 19.18% of the total TN population, higher than the
national average of 16.48%. Significant majority of the dalits (nearly 80%) still live in rural
villages (Tamilnadu People's Forum for Social Development, 2001). Lands owned by dalits
form only 7% of private lands in TN. This property is mostly unproductive and less fertile.
Combining of the above two factors (80% of dalits live in rural villages and majority of them do
not own land) results in most of the dalits being involved in agriculture and leading a precarious
life as landless agricultural laborers. Most agricultural laborers live below the poverty line due to
very low and highly seasonal income.

The right to education, like the right to own land, has been denied to dalits by the
traditional caste system over the centuries. While overall in TN about 40% of the residents
remain illiterate, as high as 60% of dalits are illiterate. The situation is even more tragic in the
case of dalit women, vis-à-vis non dalit women. Compared to a nearly 50% literacy rate for non-
dalit women in TN, not even 30% of dalit women are literate.

Great disparity between dalits and non-dalits is also found in terms of quality health care.
The higher mortality rate and death rate for the dalits in rural areas is due to lack of health,
under-nutrition and lack of awareness of health care.

According to the 1991 Census, the Scheduled Castes (SC) and Scheduled Tribes (ST)
comprised 16.3% and 8% of the total population in India, respectively. Out of the total SC and
ST population, 62.8% and 36.3%, respectively, were landless agricultural laborers. In Tamil
Nadu state, 19.2% of the state population belonged to the SC category, according to the 1991
Census. They formed 22.9% of the rural population and 11.9% of the urban population. By the
same report, the literacy rate was 46.7% among SC population, in which women’s literacy was
34.9%. Jacob & Bandhu (2002) claim that at least 80% of the total dalit population is
concentrated in the rural areas and that the vast majority of them are landless agricultural
workers, which reveal the situation of dalits as the bottommost layer of society. More than 85%
of the total SC population in Tamil Nadu remains confined to agriculture, fisheries, leather
tanning, scavenging and similar manual and sometimes demeaning occupations.

Women in Tamilnadu

TN Government has consistently claimed the superiority of its schemes for women’s
welfare, vis-à-vis other states. However, the ground reality is cause for a grave concern. As per
the 1991 Census, women in TN constitute 49.3% of the total population. Even though female
literacy rate in TN has grown considerably from 1981-1991, shooting up from 35% in 1981 to
51% in 1991, the gender gap between male and female literacy rates has continued: 51% versus
74% in 1991. Of all women, the dalit and rural women are even more disadvantaged: 35% and
44%, respectively. Drop-out rates of girls have been higher than those of boys. While the drop-
out rate of girls at the primary stage has decreased from 25% in 1984-85 to 16.5% in 1998-1999,
these drop-out rates accelerate sharply at the higher levels of education.

Access to health care service is another concern. There are indications that medical
services for women reach rural and urban areas disproportionately. While 95.2% of the mothers
in urban areas receive institutional assistance for deliveries, only 47.8% receive such assistance
in rural areas.

According to the NSS survey in 1993-1994, the workforce of women in TN (rural: 47.8%
and urban: 22.8%) is higher than the national average (rural: 32.8% and urban: 15.4%). The work
participation of women in TN has increased over the years. However, the types of works
undertaken by women demonstrate the subservient position of women at work in TN. The
majority of the working women are employed in cashew nut processing, cotton spinning, match
factory and alike.

The working Group on Women’s Development in 9th Five Year Plan reported that
“Violence against women should be viewed as one of the most crucial social mechanisms by
which they are forced into a subordinate position. It is a manifestation of unequal power
relations, which has led to men’s domination over and discrimination against women. Thus
violence against women, throughout their life, comes to be socially sanctified.” Over the past
decade, there has been a growing awareness of this disturbing phenomenon, and its long-term
impact on the development and empowerment of women. The study conducted by People’s
Watch reveals that the crimes connected to women are interlinked. For example, sexual
harassment, eve teasing and molestation often end in either murder or suicide. Among the total
582 instances of violence against women, 191 are related to dowry related violence.

Women and Governance

The Indian Constitution, through the instrument of adult franchise and Article 15 which
prohibits discrimination on grounds of sex, guarantees political equality to women. Such political
equality is hardly exercised by the women of India, including in Tamil Nadu state. The 73rd
Amendment of the Indian Constitution, by legislating a compulsory 33% reservation for women
in all local governing bodies, has brought about a significant change. At the village Panchayats
level, women form 33.7% of members and hold 33.8% of president’s positions. At the Panchayat
Union level, they form 35.3% of members and hold 36.1% of chairperson’s positions. At the
District Panchayat level, they form 34.7% of members and hold 35.7% of chairpersons’
positions. But, in other levels of political power and decision making the situation of women
remain dismally low, both in the country and in TN. For instance, among the 27 male ministers
in the State, there are just 2 women ministers (Tamilnadu People's Forum for Social
Development, 2001).

Self-help Groups (SHGs) in Tamil Nadu

Self-Help Groups (SHGs) have been promoted by the state government in recent years.
Originally initiated in May 1989, in 75 blocks of 8 districts of TN, with assistance from the
International Fund for Agricultural Development (IFAD), the program as of 2001 covered all the
368 blocks in the 28 districts of TN. According to Tamil Nadu Corporation for Development of
Women (TCDW) data of September 2000, the total number of SHGs in TN functioning in three
phases was 45, 719. The total number of women involved was 806,369 with the total amount of
loans originated equaling to Rs. 1,033,541. The repayment rate was 96%. A field sample study
done for IFAD in 24 SHGs of varied grades in 8 villages in the 3 districts of Dharmapuri,
Ramanathapuram and Madurai, though limited in its range of analysis, reports the following
trends:

a. Approximately 68% of the members of the 24 SHGs were below the poverty line at the time
of group formations
b. 43% belonged to the very poor households
c. 21.5% of the members belonged to women-headed households
d. 21% of the members belonged to dalit households.

The study also reported some weaknesses in the SHG model.

a. There is no focus on particular categories of women headed households
b. Targeting, particularly to the backward households, may require greater attention
c. Since most of the Government schemes are implemented through the SHGs, villages and
households that do not belong to SHGs are deprived of the benefits.
d. SHGs need to directly address geneder specific causes of poverty; otherwise the gains to
women maybe contingent upon male support and short-lived.

Child labor

“The incidence of child labor was found to be relatively high in the rural areas of Andhra
Pradesh, Kamataka, Tamilnadu and Punjab…” (Ministry of Finance, 1999). Estimates of child
labor in Tamilnadu have been difficult to compile, given the highly unorganized, informal and
unregulated nature of the economy, and the labor market.

The 1991 Census categorized 5.78 lakhs children (age 5-14) as child workers. NSS
(round 43) calculated that there were 11 lakhs child laborers in TN. Calculations based on
enrolment data of the Department of School Education show that nearly 28 lakhs children in the
5-14 age group were out of school in 1996-97. Experience at both policy and grassroots levels in
states like Kerala has clearly shown that the only effective answer to the problem of child labor is
to ensure that all children of school going age are in schools (Development, 2001).

Summary

While TN has benefited from improved social development in terms of literacy, health
care, employment and human development index, great disparities still persist across women vs.
men, rural vs urban, dalit vs. non-dalit and poor vs. wealthy. Thus, it is important to look at
social development by categories, as opposed to as a whole at the state level, and direct the
assistances to those groups most in need. Development programs need to be designed with
specific focus and strategy for such priority sectors, such as women, dalits, rural poor and
children.
II. Purpose of intervention

It is in this context, the Activists for Social Alternatives (ASA) commenced operations in
1986 from Trichirappalli, which is the geographic center of Tamil Nadu state in India. ASA was
founded by five social activists. It started out as a facilitating agency for poor dalit women to
make them aware of the situation around them and identify solutions to address their issues
through collective actions involving the women themselves. Having identified “patriarchy” as
the fundamental cause of all class and caste related injustice, ASA seeks to directly work with
women and empower them by mobilizing, organizing and educating them with a view to create a
humane, just and alternative social order, thereby enabling overall development of the village
communities. ASA believes that if women are empowered, their entire families can improve their
living conditions, and when families are empowered, the entire community will prosper.

Description of target group/clients/members

ASA first identified itself with deprived sectors of the society in rural areas, including
landless laborers, small and marginal farmers, quarry workers, tenant farmers, rural artisans and
dalits. The target group was set as the poorest women among the rural poor as identified through
Housing Index and Participatory Wealth Ranking exercises, as explained below. As of December
2004, ASA has reached 75,000 women members.

Each branch serves up to 3000 members through an administrative office staffed by seven
persons - a branch manager, an accountant and the five field officers. Each field officer manages
one cluster or 30 centers serving 600 women. A field officer attends weekly center meetings to
monitor transactions (savings collection, loan disbursements and repayments) and discuss issues
that members have. The members, themselves, make decisions regarding loan sanctions.

ASA has been using a combination of several tools for identifying the poverty level of its
members. They consist of Housing Index, Participatory Wealth Ranking, level of income, asset
(size of wet and dry land), caste (dalit vs. non-dalit), gender and geographical factor (poorer
villages).

ASA’s expansion is both horizontally and vertically for the proper coverage of poor women.
Our Microfinance branches located for the easy accessibility to the rural poor women. Before
entering into a new area a team of ASA’s staff in the field of community development, natural
and human resources development and finance management go to the area to study the area, its
people and their economic condition. This survey is conducted through a format designed by the
experienced staff of ASA. Only, the drought prone backward villages where majority of people
living below poverty line are selected.

After selecting the area of operation the preliminary data is collected by contacting the
village leaders, government departments, Balwadies etc., to know the economic condition of the
individual family before conducting the PRA in that village. The actual economic condition of
the clients are determined after seeing the condition of their house hold and through personal
contact with them and their family members to know the particulars of the income of the family
and other details. Only clients from house holds whose land holdings are less than half acre of
wet land or one and a half acre of dry land and land less laborers are selected. After ascertaining
these criteria only poor women are selected as the target client of ASA.

To determine the poverty level of the clients the following are the specific metrics ASA is using.

Earnings: Rs. 18,000/ Annum - Below Poverty Line(BPL)

Asset: The Land value of Very Poor must be
1. below 0.5 Acre wet land
2. below 1.5 Acre Dry land.
Housing Condition: Below 8 points (see Appendix Housing Index)
Participatory Wealth Ranking: Below 4 points (see Appendix Participatory Wealth Ranking)

These are the poverty targeting tools that have been used by ASA up to date. In order to
improve the reliability of these tools, ASA is considering making modifications to its current
tools and adding some new tools/indicators, such as food security. In India, the national poverty
line is defined by two main indicators: income and calories intake. So, we at ASA are
considering lining up our poverty assessment indicators with such national poverty assessment
measures. We believe no single indicator or tool will itself be able to capture the multi-faceted
nature of poverty. A combination of at least two tools/indicators will be more effective. This
does not mean a complicated, long set of indicators.

ASA has been collecting the data on each member at entry. Below are results of the data from
ASA member database.2

Housing Index: 52.5% of the members were very poor when they joined ASA, while 46.9% were
poor and 0.6% were rich according to the housing index scores.

Household monthly income: 72.7% of the members have monthly household income below the
national poverty line, while 27.2% had above poverty line at the time they joined ASA.

Caste: 77% of the total members belonged to (economically) backward caste when they joined
ASA, while 19% were scheduled caste (socially) and 3% MBC.

Gender: 100% of ASA’s members are women.

Geographical distribution: 65% of ASA’s members were rural when they joined ASA, while
18% were semi-urban and 17% were urban.

2
We have also attached graphs of the member info analyses in PPT.
Age: 44% of members were at age between 21-30, whole 39% were at age between 31-40 when
they joined ASA. This shows most of ASA’s members are between 21-40 when they join.

Average size of loans: Significant majority of ASA’s loans fall below $200 (almost 70%)

No. of loans taken: 76% of members have 1-3 loans, 21% new members (no loans yet) and 3%
with 4-6 loans.

III. Description of Methodology

A. Summary of design concepts: Include rationale of intervention – What is your theory of

change? What did you know about client behaviour that led you to this intervention? What
are the intended impacts of your program? How are the inputs designed to achieve those
intended impacts?

During its initial years, ASA started to form groups (sanghas) in order to facilitate
participation in integrated development ventures. These ventures took into account the members’
prioritized needs and issues and facilitated access to sanghas and forging linkages both with
sanghas and with external groups. However, this strategy of organizing the community members
was found to have weaknesses, such as (1) the groups dissolved as soon as the particular issue
around which they were organized was addressed, (2) there was no sustainable source of
financial resources to keep the activities going, and (3) only a limited number of groups could be
mobilized at a time as it was expensive for ASA staff to go to villages and facilitate the
implementation of each project.

Having experienced the limitations of organizing women on ad-hoc basis, ASA felt that
economic improvement of women would be the strongest and most sustainable base for their
social and political empowerment. While still operating issue-based programs, such as watershed
projects, programs for fair rural wages, alternative employment in gem-cutting, and alike, ASA
observed that savings and credit program held the greatest potential for improving the economic
status of large number of rural women. In 1995, ASA started adapting essentials of Grameen
methodology, the microfinance program replicated all over Asia, and commenced its own
microfinance program “Grama Vidyal (GV)”, meaning “Dawn of the Rural Poor”. Small
amounts of credit were given to the poorest women for various income generating activities
(IGAs) as well as consumption (such as funeral, holiday and wedding expenses. No collateral
was required as the screening criteria are based on tradition, skills and knowledge of the
particular IGA to be financed with loans from GV. Activities included cultivation, animal
husbandry, petty trade, and small scale production serving local markets. ASA has grown into a
major microfinance institution (MFI) that uses microfinance as an entry point for credit plus
services, organizing the poor women for economic, social and political empowerment. ASA also
strives to serve as a resource center and training ground for other MFIs and NGOs that desire to
implement microfinance as a poverty alleviation and empowerment strategy.

Federative structure
 The goal of Grama Vidiyal is to empower members and train them to become the users,
managers and owners of the organization. Thus, ASA designed and put in place a federative
structure which provided a venue for individual women members to voice their opinions and
participate in the decisions regarding the GV program. It has also put in place a decentralized
administrative structure comprised of federation, branches, clusters and centers. Women elect
their own leaders and representatives at each of these levels.

At the foundation of ASA are the poor women. Once the women are identified as
potential members, they are organized into a five-member group and elect their group leader.
Homogeneity in terms of power—class, caste and gender—is ensured. The group members are
not allowed to be relatives. Each member in a group shares responsibilities for her fellow
members’ behavior and repayment of loans. The women in these small groups also give advice
and support to each other if they face problems operating their small business or repaying their
loans. Four of these five-member groups form a center. Members in each center then elect their
center leaders for representation. The center leader plays an important role in monitoring the
functioning of the groups as well as in encouraging members to actively participate in public
activities, thereby promoting self-confidence. Members assume the leadership required to
address their concerns. Four groups meet every week for center meetings, which serve as a
platform for various other services targeted to set in the motion women’s empowerment, such as
increasing awareness of issues related to health, nutrition, gender, political system, and
government programs and alike. This is where the women get together to discuss about the issues
they face in their household, business and communities, and identify ways to address those issues
collectively by extending support to each other.

Programs and activities

In order to empower the dalit women socially, economically and politically, ASA believes
it is crucial to provide integrated range of programs and activities. They are grouped as
“Microfinance – GV” and “Credit plus – developmental” programs. Financial services are
essential, but not sufficient. Thus, ASA makes sure that the members are provided with the non-
financial services that they need.

Microfinance – GV programs

Credit: ASA offers three types of loan products: housing, consumption and income generating
activities. Examples of income generating activities include animal husbandry, crop, trade,
manufacturing and service; examples are tea stall, snack shops, cottage industries, small scale
trading, basket making, crafts, milk business and alike. As of November 2003, MIS report shows
that the total outstanding loan portfolio is Rp. 150 million (US$ 3.26 million) 70,000 borrowers.
Regardless of the type, first loans are limited to Rp. 3000 (equivalent of US$60) and the
maximum loan size is Rp. 10,000 (equivalent of US$200). The loan amount is divided in to 50
weekly installments. The loan term is one year. Interest rate was reduced from 18% in 2000 to
12% in 2003.

Savings: There are two savings products: compulsory and voluntary. In order to receive a loan,
members are required to deposit a fixed amount of savings in their account. As of December
2003, the compulsory savings size is determined by the loan size. In addition, members are given
an option to deposit any amount in their savings account. This is voluntary savings. Before
December 2003, the voluntary savings were collected at the center meetings every week. Due to
fraud and misappropriation of voluntary savings, ASA changed its policy and now, members
have to make deposits at the branch office. The minimum voluntary savings amount is Rp. 10.
An interest rate of 5% is paid on both types of savings. Voluntary savings can be withdrawn at
any time, while compulsory savings are five year time-deposits.

Pension Scheme: The objective of this scheme was to provide financial assistance to Grama
Vidiyal (GV) members in their old age, when they are not able to earn their daily livelihood. This
scheme was launched in August 2002. The purpose of the program is to build security for the
members and to avoid dependency on others. The members are given options to save from Rs20
to 100 every week depending on their savings capacity. They must continuously save for a
minimum period of 5 years to maximum of 15 years to be eligible for a pension. In case of
emergency need, a participant is allowed to withdraw the savings under pension scheme, but she
loses her eligibility. If the members have continuously saved for five years, an amount equal to
the total savings is given as interest. Then the pension is paid out either monthly or as one time
bulk payment. The term of pension is determined based on the members’ preference.

Insurance Scheme: A poor woman’s death is a great loss to her family. In order to compensate
the loss to the extent necessary to sustain the same economic standard of life and to protect the
future of the family, an insurance program has been launched through partnership with private
insurance companies, namely Allianz Bajaj & AMP Sanmar. The members remit their insurance
premium yearly. Fifteen days after payment of the premium, the insurance takes effect. During
the policy period of one year from the date of commencement, in case of death of the policy
holder, the sum of Rs. 20,000 will be disbursed to the legal heirs. If the member is purposely
killed in order to receive the policy amount then the amount will not be given at all to the
perpetrator. Each and every year the policy has to be renewed by paying the premium. The death
of the member is reported immediately to the center leader and the branch manager. The branch
manager and the field officer of that center then go to the place of death and explain the rules and
regulations for making a claim. The branch manager fills out the death details in the prescribed
form and sends it to the Head Office. In turn, the insurance department staff informs the
company. One week after the date of death of the member, the death certificate is obtained from
the Village Administration Officer and sent to the branch. With the approval of Branch Manager,
it is sent to the head office and from there to the respective company. The company pays the
nominee within one month of receipt of a complete claim,

Developmental programs – Credit Plus:

Gender sensitization: ASA organizes workshops for the GV center leaders and their husbands
on topics which include micro-credit, development of women, gender equality and
empowerment processes. The focus is on creating awareness amongst women and men about
women’s contribution in the productive and reproductive sectors and hence addressing important
issues of sexual division of labor, inequality, and decision-making. ASA is also acting as a
resource agency to impart training to other NGOs and government officials. During the fiscal
year 2002-2003, ASA conducted state-level training on “Gender Sensitization” to the engineers
of Tamilnadu Water Supply and Drainage Board (TWAD) on three occasions. During February
2003, ASA also provided training on gender sensitization to students at Holy Cross College in
Trichy; about 200 female students participated.

Capacity building: To move towards the full participation of the women members as users,
owners and managers of the Grama Vidiyal, capable women members are elected by members,
given training and are placed as Community Field Officers (CFOs). They are trained in
leadership skills, financial management and accounting. The training is conducted at the branch
as well as in the field under close guidance by the field officer. After completion of the training,
CFOs play the role of the field officer on alternate weeks, when the field officer is scheduled to
visit other centers. Their main duties are to conduct center meetings, make bi-weekly collection
from the members, record transactions in the members’ passbooks, and act as facilitators to
discover the rights-based issues that members are facing in their communities so that these issues
are addressed collectively. Annual report 2002-2003 states there were 600 CFOs taking
responsibility at their centers. Furthermore, one community leader is identified and elected by
the members at each branch and is given training to act as an Additional Manager of the branch.
They are responsible for carrying out the daily operations of the branch and regular field
monitoring. They also facilitate other community members in identifying the socio-political and
economic issues that they are facing and addressing collectively. As stated in the Annual Report
2002-2003, there were 22 such community leaders placed in the branches as Additional Manager
(ASA, 2003).

Advocacy and campaign: There are two main right based programs that involve advocacy and
campaigns as their instruments: (1) dalit empowerment and gender equity; and (2) land tenant
and natural resource rights programs. To prevent violence and atrocities against women,
especially against dalit women, ASA organizes empowerment training and workshops for the
dalit NGO leaders and staff members in Tamilnadu. Gender Equity residential training was
conducted to create an awareness of gender perspectives especially of dalit gender issues. Every
year an international woman’s day campaign is organized in all the branch areas through the
Grama Vidiyal federation. Through this program unity and integrity are strengthened and also
awareness education concerning the problems relating to women, violence against women, and
rights of women is provided. In terms of the second component, ASA has been organizing
community members to restore the lands from the traditional land owners called zamindhars,
according to the land tenant’s act, to the tenant families who cultivated the land for generations
as bonded laborers. Mostly the land tenants are the poor dalits. The fore fathers of these land
tenants were engaged by the zamindhars or landlords as agricultural laborers for meager wages.
The wages were mostly in the form of paddy or grains, and were at a subsistence level. This
would place in acute poverty and reliance on begging for more grains advances from the
landlords. In turn the landlords advanced grain in return for bonding additional family members.
ASA has been organizing awareness campaigns for land tenants. Many community leaders of
land tenants and quarry workers in Trichy and Pudukkottai districts actively participate. Eminent
lawyers and dalit leaders who were instrumental in the restoration of land tenants and panchami
lands were invited to convey the legal aspects and share their experience. Other examples of
ASA’s work in tenant rights advocacy include: in the Marungapuri block of Trichy District, all
the tenants have formed a sangha to articulate their problems to the government. The land tenants
are given legal protection which prohibits the Zamindaries from selling their lands to third
parties. The land tenancy rental is paid to the landowners through a demand draft.

Local governance: ASA’s annual report 2002-2003 states that ASA aims to increase the
participation of women, especially of dalit women (ASA, 2003). ASA promotes their leadership,
organizes dalit panchayat presidents and ward members for the purpose of creating space for
them, helping them define and articulate their issues and enabling them to engage in existing
institutions through proper guidance, training and networking. Members are trained on the
operations of Panchayat Raj Institutions, local governance system and legal roles and
responsibilities. They are also encouraged to participate in the local governance. Moreover, the
members are provided with a loan to finance election campaigns and all the other members are
motivated to support nominated members and vote for her. In this manner, the participation in the
local self governance and creating the best administrators to attain sustainable development is
enhanced. There is discrimination and disparity of opportunity for dalits and women in
contesting in the panchayat raj election. Therefore a strong federation has been formed at the
state level to bring a policy level change in the government. During the last election, 175
members stood for election; 103 members won.

Table: Elected members

Ward Panchayat Councilors Total SC BC
members Presidents
95 6 2 103 35 68

The elected dalit leaders were trained for two days on PRI. The roles and responsibilities
of the panchayat leaders were also covered in the training program and 150 participants from 75
voluntary organizations participated in the program. Then, in February 2003, motivation training
was organized at ASA Community College (ACC) for 157 elected Grama Vidiyal PRI leaders,
including panchayat ward members, councilors, and presidents from Trichy, Pudukottai, Madurai
and Dindigul districts. The goal of this session was to facilitate the empowerment of the PRI
members through providing a platform sharing their achievements and strategies for overcoming
the hurdles faced by them in implementing the development program in their PRIs. Apart from
motivating the PRI members to function efficiently, an empowerment convention was also
arranged to guide them regarding the recent legislation concerning local governance.
Government programs like waste land development, drinking water provision during drought,
utilization of the elected members’ fund and Prime Minister’s fund were highlighted during the
convention and the PRI leaders were encouraged to fully utilize the government programs as
well as other resources for the benefits of their constituents.

Networking: ASA’s Community College (ACC). ACC provides a venue for members, staff and
management to undertake various group discussions, interact and network with each other, and
conduct workshops and training. It provides residential training programs for members of
networks of NGOs at the state level (MICNET), regional (NESA) and national level (INDNET).

Matriculation school: ASA believes in the importance of eradicating illiteracy, especially in

rural communities in attaining its vision of poverty free sustainable communities. In 2001, ASA
opened Vidiyal Model matriculation school, which provides an opportunity to get secondary
education to the children of the poor. Previously, education was available only to the rich and
wealthy segments. Children in families who were below poverty line were not given any
opportunity to go to school; instead they had to work to help support their families with living.
ASA opened up a new era in this divine service “to give education to the needy children.” The
enrollment of the school increased from 140 to 200 in 2002-2003. To address the constraints with
transportation, ASA arranges bus service at nominal fee. The students are charged about US$1
per semester for tuition and are provided with uniforms. At the time of the field research, a
bigger school building for 500 students was under construction.

Child Labor Elimination and Effective Rehabilitation Program: This program was
commenced in the year 1997 with financial support of “CHEERS”, which is a government
project to eliminate child labor and to educate and rehabilitate child laborers. Through this
program, children who were previously working for living are given free education, stipend,
vocational training, health care facility and note books. The best performing students are also
identified and given assistance to continue to higher education. In 2003, ASA was running five
such schools, training 140 school-aged children who were previously engaged in labor. In total,
234 children went through the schools and 203 children were admitted to regular schools. Apart
from regular studies the students are also trained in skills such as basket-making, tailoring, fine
arts, and computer skills. The family members of these children are also provided micro-credit to
generate income to compensate for the loss in earnings engendered by sending their children to
school.

Natural resource management: According to the Annual Report 2002-2003, three watershed
programs were implemented in the Pudukottai district under the fund support of NABARD
(ASA, 2003). Project activities are carried out in a participatory manner. Watershed committees
are formed and action plans are developed by the committees. The major activities of the
program include natural resource conservation and management, such as conservation of water
ways, renovation of water sources, building awareness of watershed management and carrying
out effective management systems. The watershed committee is formed with 30% women, 20%
landless farmers, and 20% dalit members. After a complete training is provided by the project
staff, all the responsibilities of implementing and running the project is given to the community
watershed committee and one staff representative of ASA.

Business development services: As a strategy to achieve economic empowerment for women,

ASA provides micro credit to its members and helps them to undertake micro-enterprise or
income generation activities. In addition to the supply of micro credit, ASA provides business
skill training, counseling through weekly center meetings, information on new business
opportunities and marketing linkages. Examples of topics of business training include raw
material procurement, processing, packaging, marketing, profit and loss accounts, and record
keeping. To create market linkages, GV entrepreneurs participated in an exhibition conducted by
the Government of Tamilnadu at Madurai. ASA has arranged a display of members’ products in
all branches to create awareness and marketing their products to members and the public. At an
annual International Women’s Day celebration, an exhibition of the different products of
members’ businesses is held. Entrepreneurs are encouraged to build market linkages. Moreover,
more successful micro entrepreneurs are invited to provide training to other members.
Vidiyal Information Service Provider (VISP): ASA was selected by Grameen Technology
Center (GTC), USA to launch a project using developments in information and communication
technology. They created six kiosks called VISPs in rural areas of Tamilnadu. VISP provides a
range of information and communication services through the kiosks by establishing linkages
with various resources, such as government departments, universities, research institutes,
hospitals, travel agencies, markets and alike. Such linkage is expected to enable the rural masses
to access resources at their doorstep and thus, save travel costs and time (opportunity cost of
foregoing their daily wage). VISPs provide the following types of services: e-governance – this
is in coordination with government departments to bring the rural mass closer to the government
schemes and services; e-madal – the kiosk operators arrange e-mail delivery to the far off
recipients; matrimonial – bride and groom database is made available in the kiosks for finding
suitable matches among villagers; net-to-phone – overseas tele-talks at affordable rates, which
will help the poor villagers to contact their significant ones living abroad; healthcare – online
appointments, consultancy, health education and treatment information (VISPs also intend to
facilitate feasible environment for rural medical camps and high quality health care at affordable
cost for the target clients); agriculture, animal husbandry and allied services – updated
information on animal husbandry, agricultural inputs, and current market rates is communicated
to the villagers; computer education – high quality basic computer courses are provided to the
members at affordable rates to bridge the digital divide; and e-commerce-online market place
that connects sellers and buyers with an intention of facilitating better revenue for better products
for both trading partners. In addition, VISP strives to facilitate linkages for providing services
such as insurance and emergency services, such as police, fire and ambulance. Entrepreneurs are
given training and loans to run the kiosks as a business in the incubation period. ASA also
provides technical assistance and maintenance of the portal.

B. Process/steps in implementations: Summary of work plan, action steps and example of

the typical process followed.
<Gama> I wonder if this section can be combined with the above

C. Method of measuring results: Briefly describe monitoring methodology.

ASA-GV has been among the pioneers in implementing two impact assessment tools –
Internal Learning System (ILS) and Assessing the Impact of Microenterprise Services (AIMS).
Furthermore, ASA has made significant commitment to institutionalize monitoring system to
track the progress towards achieving its target group and social objectives, which are explained
below.

ILS –Internal Learning System: ILS is a participatory impact assessment program of ASA
designed to study the impact of the program by using simple pictorial diaries. This program was
implemented to measure the real development of the members. Through the pictorial diaries, the
women learn by themselves and make notes about how they run their enterprises successfully by
getting loans from Grama Vidiyal. The aim of ILS is to create participatory monitoring and
impact evaluation system that is internally-driven and responds to the on-going needs of ASA-
GV and its members to learn what is working and not working so that changes can be made in a
timely manner.

Client Assessment and Monitoring System (CAMS): With an objective to institutionalize a

cost-effective system to monitor and assess the members in terms of their satisfaction, impact,
poverty level and desertion from the program in a participatory manner. The information is
expected to assist the organization to learn the strengths and the gaps in the program and improve
further. A common data base of new members was created and is updated at the time of loan
disbursement. By conducting sample surveys and focus group discussions with current, former
and potential members, the feedback is collected to ascertain the impact of the program and to
make refinements in the program to make it more responsive to the needs of the members and
ensure the poor is being reached. This is also a system to monitor the implications of ASA’s
strategic decisions, such as scaling up on members and services.

Social performance management (SPM) system: Building upon these two assessment and
monitoring systems, ASA is in the process of institutionalizing a comprehensive management
system to manage its social performance. In this effort, ASA is collaborating with other
practitioners and industry leaders in the scope of projects such as CGAP Social Indicator project
and ImpAct Social Performance Management project.

IV. Results

ASA has undertaken a number of initiatives to assess and monitor the results of the program. To
summarize, below are the results of three main assessments.

Exploratory assessment

In 2001, ASA, with a technical assistance from an independent consultant, carried

out an exploratory assessment of its performance in terms of social objectives.3 In total, a random
sample of 350 existing clients was selected from six branches which had operated for more than
one year.4 Of those, 40 members were interviewed individually in order to identify the nature and
dynamics of empowerment that resulted from participation in the program. 5 Secondly, 24 focus
group discussions were conducted to learn about the members’ satisfaction with the program as
well as their recommendations for improvement.6 The average size of a focus group was nine
members. The groups were formed homogeneously according to their branch locations and the
length of time of their participation in the program (the number of loans was used as a proxy).
While a set of indicators served as a semi-structured guide, the individual interviews and focus
group discussions were exploratory in nature, and thus, sought to explore and identify other
3
For more info, contact Gaamaa Hishigsuren, PhD, at Gaamaa@ideasnet.org
4
All of these are in approximately the same proximity to nearby district centers, and have similar political and
socio-economic basis. It was the assumption that the level of empowerment would differ according to the number of
years of participation in the program. Therefore, the sample for both tools was selected from three major groups:
162 members taken 1-2 loans, 112 members taken 3-4 loans, and 75 members taken 5 and more loans. The number
of members selected for more than 3 loans is fewer because 4 branches had been in operation for less than 4 years.
5
16 had participated in the program for less than 2 years, 17 for 3-4 years and 7 for more than 5 years.
6
90 invited members did not come due to sickness, Muslim holiday, family problems and unexpected rain. A
minimum of five members was required for a focus group discussion to be conducted.
dimensions of impact that ASA’s programs had on its members’ lives (see the following tables
for the list of sample indicators).

Table 1: Indicators used in the first exploratory assessment

Individual: Community level empowerment

Dreams/Plans for the future Participation in public meetings
Mobility Addressing social and infrastructure issues
Appearance Caste issues
Savings
Decision-making

Household Client satisfaction with:

Nutrition 1. Loan size – 1st loan size & Maximum loan size
Access to Better Healthcare 2. Savings: – Compulsory savings weekly amount
Housing condition 3. Insurance: – Amount of premium (Rs.500 lifetime or
Assets and house facilities Rs.60 for one year
Role transformation 4. Marketing: – Internal linkages – Vidiyal Shandi
Economic empowerment 5. Federation & Networking – a) Addressing Socio
Jobs created economic, political and developmental issues
b) Participation in local governance

The main findings were that ASA’s holistic approach to development

implemented through provision of both financial and developmental services had
contributed to positive changes in its members lives. 7 Its micro finance services as a
combination of credit, savings and insurance products have provided its members
economic empowerment in terms of increased income, economic security and risk
management mechanisms. On the other hand, its developmental services, such as
beyond credit and credit plus led to changes in social and political lives of its
members and their households, such as compared to the newer members, the
longer term members were more likely to have participated and spoken in public
meetings, visited important local government offices, and participated in election
campaigns (Hishigsuren, 2000). As a result of both financial and non-financial
programs, women’s social status has improved and members were able to
contribute to successful efforts to address issues related to dowry, female child
discrimination, marital issues, and alcoholism not only within their village, but also
in other villages. The respondents reported that they became confident in taking
collective actions to transform oppressive situations in their communities. These all
contribute to the women’s increased self-confidence and ability to take control over
decisions affecting all aspects of their lives.
Internal learning system

ASA has undertaken a three-year panel study of a random sample of its participants who
are tracked for impact assessment purposes over a three-year period. Data gathered in the
baseline period was analyzed on a cross-sectional basis comparing the results of older members

7
For more detailed information on findings, see Hishigsuren (2000).
with newly joined members. With only a few exceptions, the results show a significant level of
positive socio-economic impact for ASA women participants and their households.

The preliminary results indicate that “ASA appears to be reaching its poor target group
given the high level of landlessness, few productive assets, low literacy and poor living
conditions for newly joined members (Hoponen, 2003).“ The results revealed positive changes in
productive activities, social status and treatment at home and community, as well as their
household living conditions and consumption standards, although there were a few negative
findings such as higher indebtness for longer term members and higher utilization of loans in
consumptions and male productive activities than in women’s productive activities. Furthermore,
ILS has been perceived by poor women members and staff as empowering and having positive
impact (Noponen, 2003).

Results of client assessment and monitoring system

Poverty outreach: ASA is reaching the women of poor households:

 100% of members, at entry level, had household income per capita less than the state
GDP per capita
 99.9% of new members lived in housing which was scored less than 8 points on Housing
Index qualifying those members as poor
 100% of ASA’s members are women
 71% of the members are served by branches located in rural areas
 99.6% of members are Dalits.

Impact: ASA’s mission statement reads that ASA aims to achieve empowerment of women in
three areas: economic, social and political. Accordingly, specific indicators were developed and
measured impact in these three areas. Overall, the findings indicate positive changes in
members’ living conditions. However, when mature members (those who had received more
than 3 loans or had been in the program for at least 3 years at the time of the research) were
compared to new members (those who had received no loans or only one loan at the time of the
research) some of the results were not statistically significant. There were a number of areas
where mature members had reported more positive changes than the new members. For instance,
mature members were more likely to report that loans helped their families, that they participate
in International Women’s Day and organize other members to address domestic violence and
abuse issues. Few areas demonstrated statistically significant differences, and they are noted as
“yes” in the last column of each findings table. For instance, the mature members were more
likely to experience help from loans with respect to clothing and personal items and it was
statistically significant compared to new members. Also, mature members were more likely to be
confident in planning for the future compared to new members. However, the differences were
not statistically significant, which means the changes may not be attributable to the program
intervention.

Scaling up

According to the Annual Report of 2001/2002, ASA plans to reach 100,000 members by
2005 and 200,000 by 2010 (ASA, 2002). However, the current legal status as a Public Charitable
Trust poses limitations in achieving this goal of scaling up its outreach, such as constraints in
mobilizing fund necessary to support growth (in the form of public deposit as well as private
investment, namely external commercial borrowing) and threat from the Income Tax Department
(possible withdrawal of charity status). Therefore, ASA is planning to transform the GV
microfinance program into a non-bank finance company (NBFC) and Community Mutual
Benefit Trust (MBT) with the following objectives: (1) To formulate an innovative and new
model of Micro Community Banking Institution, (2) To reach more poor women members
through a strong governance, finance and legal structure, (3) To raise adequate capital for the
financial institution from all available sources; not only for start up but to remain capitalized to
fuel the anticipated growth, and (4) To deliver financial services to the poor in an effective and
efficient way. The proposed administrative structure is illustrated in Appendix 4.3.1.

A new profit oriented entity, Grama Vidiyal Microfinance Limited (GVMFL), a NBFC
will be formed. The existing GV branches will function independently as profit organizations
called Grama Vidiyal Community Mutual Benefit Trust (GVCMBT) which will have members
organized in SHGs. Each GVCMBT will have around 175 SHGs of 20 members each totaling
around 3500 members. The role of the GVMFL is limited to fund raising and acting as a conduit
of funds for the GVCMBTs. This way, members are empowered by giving representation to the
SHGs in the board of the GVCMBTs. The expected outcome of the transformation includes (a)
limited liability company limit risk, (b) more professional approach is possible as attracting
skilled professionals is easier, (c) savings retained at SHGs and MBTs act as a Special Purpose
Vehicle for future lending, (d) community empowerment will be attempted, and (e) problems
relating to staff and losses will be localized and the administration will be more flexible.

V. Resources Required/Cost to the institution

Evaluate the Cost Effectiveness and Sustainability

VI. Challenges and Pitfalls/Lessons Learned

Challenges of scaling up

Overall, ASA has significantly expanded its coverage, increased the number and type of
activities, improved organizational sustainability and scaled up its strategies. Data gathered by
the author in January 2004 point out that these results have been achieved despite a number of
challenges. A number of challenges have been encountered during the scaling up process. This
section discusses the main challenges that were identified during the individual and group
interviews with the board members (4), funders (3), and management groups (2). Also, data is
drawn from the review of archival documents, including annual reports of the last two years. The
most significant challenges that were identified through these sources of qualitative data are
summarized below.

Unfavorable legal and regulatory environment

 The most significant challenge ASA has faced during scaling up is due to its legal status
and recent regulatory decisions of the national and state governments. ASA is registered as a
Public Charitable Trust and thus, is not allowed to mobilize public deposits. Such legal status
constrained its ability to increase financial resources necessary to fuel the rapid growth. Also,
ASA was affected by the policy of the Reserve Bank of India (the central bank of India) banning
the receipt of funds from abroad for re-lending. This action is primarily because microfinance
activities have expanded and become visible, thus leading to concerns among regulators that led
to tighter regulatory policy on cash inflows from abroad. Next, the Tamil Nadu State
Government issued an ordinance placing an interest rate cap on lending and applied it to MFIs.
This is also primarily because lending activities expanded all over the state and became visible,
causing the government officials to become concerned about the usury interest profits drawn
from the poor.

These two decisions came as a jolt to ASA’s scaling up effort because both resulted in a
narrower margin and limited sources of funding. ASA like other MFIs used to enjoy the on-
lending fund from abroad at a lower cost. Due to the ban, ASA had to raise on-lending funds
from the domestic financial market to finance its increasing portfolio. As the demand is higher
and the supply is less, ASA experienced the challenge of a higher cost of funds. On the other
hand, the TN Government ordinance on the Prohibition of Charging Exorbitant Interest of 2003,
which formed a part of TN Money lender’s Act of 1957 placed a 12% cap on the maximum
interest rate that can be charged on loans. This was aimed at controlling the activities of
moneylenders and eliminating some of the practices known locally as daily vatty, meter vatty,
and other money-lending activities. Unfortunately, the Act did not specifically exclude MFIs
from the definition of moneylenders and their inclusion threatened the very existence of MFIs
including ASA in TN. As a result, ASA had to cut down its interest rate from 18% to 12% per
annum which left them with a much narrower margin to cover the cost of its operations. In
addition, this single act led to serious challenges to ASA’s scaling up from various actors in the
wider environment in which ASA operates, such as government, mass media, the public, police,
local district administration and financial institutions.

Insufficient financial resources

As ASA has expanded the operation into new locations and increased the number of
members, the need for on-lending capital has risen rapidly. While the number of members per
branch increased from 2000 to 3000, the source of on-lending capital has not increased. Yet
conventional financial institutions still do not feel confident in lending to and investing in ASA
since it is an unregulated, non-profit Trust. Even those who did lend had a strict frequent
repayment schedule, and usually offered short-term loans. Often, the sources of funding were
unstable and insufficient causing a delay in loan disbursements to members. Also as a
consequence of shortage of on-lending fund, ASA reduced the maximum size of loans and limit
the number of loans to be disbursed each month.

Besides the increasing need for on-lending capital, ASA had to cover huge costs
associated with creating capital infrastructure of 13 new branches within one year and
improvements in the technology, as described in the previous section. Related to the rapid
increase in the number of branches, was an increase in the number of field officers and general
staff, this required additional fund to pay for salaries and benefits. Finding money to cover such
operational expenses as well as capital investment posed additional burden.

Lack of human resource

To manage the expanding portfolio and increasing array of financial and non-financial
services, ASA needed to hire a greater number of new staff. However, attracting staff members
who are not only competent, but also committed to ASA’s mission was most challenging.
Training them to perform consistently required more staff time and higher operational expenses.
During 2001-2002, ASA hired 62 additional field officers, more than double the number from
previous year. This required significant time from existing staff to interview, select and then,
train these new field officers. The following year, 2002-2003, ASA could not increase the
number of field officers in proportion to the increase in the number of members because of
several reasons: (1) difficulties in finding competent and committed candidates; (2) turnover of
newly recruited staff members due to heavy workload and hard working conditions; and (3)
insufficient financial resources to cover increasing operational expenses.

There are also problems with staff performance. There was a need for extensive, hands-
on training. ASA had to transfer experienced staff to a new branch to train the newer staff on-site.
On average, staff members were transferred every 3-4 months. Such frequent transfer led to
several problems: (1) members expressed dissatisfaction because they had built a relationship
with the previous field officer and now, every 3 month or so they encounter a different field
officer; and (2) some staff, especially women staff were not happy because they had to leave
their families behind and for married women in a conservative society like India, leaving the
family and going to another village was socially unacceptable. Therefore, ASA started to
promote the longer-standing members to become community field officers (CFOs). These
members had been elected by the other members as a leader at their respective centers. The
benefits of such strategy were perceived to be: (1) effective way to manage cost; (2) community
members know the other members well because they have been in the community long enough
to have more information and knowledge about them; (3) since they are required to have been
ASA member at least for two years, they are familiar with ASA’s program and policy; and (4)
community members are usually trustworthy and are not likely to run away with the money.

At the head office, ASA has been trying to find more professionals to manage the
financial and institutional aspects of the operation, since ASA is planning to become a regulated
NBFC. However, again ASA has not been able to find and keep professionals. As one of the
management staff commented during the group interview:

“When professionals are recruited, they are not able to handle the workload, are not used
to go to villages and work in villages with poor people, and do not know the local
language.”

Since ASA operates mostly in rural areas of Tamil Nadu state, the majority of the
members speak Tamil, the local language. This language requirement has restricted ASA to
locate staff only from the local areas. Thus, ASA has not been able to bring in fresh new
graduates or professionals from other states in India.
 One interesting finding to be noted here is that despite the heavy workload and hard
working conditions (such as long hours traveling to and working in villages), there seems no
evidence of lower staff morale and a higher staff turnover among the existing staff. This applies
to staff members who were with ASA prior to the scaling up, rather than the staff members who
were recruited after the scaling up. All interviewees stated that the staff were very committed to
the poverty alleviation mission of the organization and were willing to work with increased case
load and hard conditions. The three front-line staff members who were interviewed said that the
main motivation for them to remain working with ASA, despite the increased case load, was the
personal satisfaction from the work they did and the positive impacts they see by helping the
poor women. This social reward was what kept them going.

Unhealthy competition

All the stakeholders who were interviewed indicated that competition was a challenge for
ASA as it attempted to expand its coverage. The three main competitors were moneylenders,
other NGOs and the government. In India, particularly in the state of Tamil Nadu, the
government was actively involved in delivering microfinance services. The government had set
up Women Development Corporation (WDC) to provide microfinance services through Self-
Help Groups. This was closely related to the policy of Reserve Bank of India and allocation of
significant financial support from both national and international community to promote SHGs
throughout India.

Due to such “unhealthy” competition, ASA had to close down three of the new branches
and continues to face significant challenges as it strives to expand its coverage by increasing the
number of branches and members.

Increase in cost

The most significant increases in cost were related to investment in the capital
infrastructure, improvement in technology and increase in the number of staff. Recruiting 200
staff in two years, training them in developmental and micro-credit concepts and sustaining them
as a quality resource was a difficult and expensive task. The personnel cost for the 200 staff is
huge for the institution to bear. In addition to the personnel cost, ASA experienced significant
challenge of cutting down the expenses in order to meet the Tamil Nadu Government ordinance
to keep interest rate at 12% per year. ASA reduced the interest rate to meet this requirement, but
the cost of funding from financial institutions did not reduce (e.g. 14% from ICICI bank). Thus,
the margin turned into negative. To address this negative margin, ASA had to reduce the number
of staff. Some field staff members were degraded to other tasks with a lower salary such as
looking after insurance and pension. Furthermore, as ASA increased the number of non-financial
activities the cost of implementing those activities became a significant challenge especially
because they were not generating revenue. On the other hand, the margin from financial services
was negative due to interest rate deduction. For instance, to provide business development
services, more staff time was required to give training and counseling to both members and field
staff on various business skills, which implied an increasing cost but no income to cover that
cost.
Incompetent management information system

Like many MFIs, ASA had rudimentary MIS and reporting systems when they started.
However, as they scale up their operations and introduce new products and service, the current
MIS did not have capacity to accommodate the new changes and scale. This forced ASA to seek
new software, which results in an increase in cost. This not only involves the purchase price of
the new software and related infrastructure, but also the fee for the developers to train ASA staff
both at the head office and in the branches, staff time spent on working with the developers, and
cost of implementation in the branch offices. The end result was high cost and the precious staff
time foregone from regular operations.

Natural disasters

During the last several years, Tamil Nadu state experienced severe drought and shortage
of rainfall in many of the districts. As a result, the purchasing power of the residents declined
significantly. Those who earned their living from agriculture were most affected because of a
significant decline in the harvest. As most of ASA’s members rely on agriculture as their source
of living, their capacity to utilize loans effectively has deteriorated. As a result, it has become
more challenging for ASA to screen the capacity of members’ investment options especially if it
is related to agriculture. In the next section, the data analysis will demonstrate that there is a
decline in the proportion of loans given for agriculture purposes, such as leasing or purchasing
coconut trees and growing vegetables or fruits.

Summary

In summary, the respondents identified several key challenges ASA encountered during
the scaling up process, namely, unfavorable legal and regulatory environment, insufficient
financial resources, lack of human resources, and increasing costs. Interestingly, none of the
participants in the study commented on deterioration of portfolio quality as a challenge. There
were some other challenges that were mentioned but as less significant, including incompetent
management and information system, and effects of natural disasters like droughts.

VII. Contact information/ sources of information

Gaamaa Hishigsuren, PhD

Director of Research and Development
Institute for Development, Evaluation, Assistance and Solutions

Email: Gaamaa@ideasnet.org
Tel: (718) 309 1602
2833 46th street, Apt. 2
Astoria, NY 11103