Harald Strotmann and Melinda Schmidt

Little Steps, Big Dreams

In rural Karnataka, in the south of India, women are searching for creative ways to improve their own as well as their neighbors’ standard of living. One of the difficulties for rural villagers, particularly for women, is to have access to credit to be able to invest and generate income for their families or to get better access to education and health.

In 2011, the Crop Science division at Bayer launched a scheme called “Model Village Project.” One of the core initiatives within the project includes working with groups of women in two villages. In collaboration with an Indian NGO the women have formed more than 20 “Self-Help Groups” in both villages; each group has around 10 to 12 women members.

In their first meetings these groups of women decided on a savings plan that feels comfortable for them. They agreed to meet every two weeks and contribute their savings to build a reserve. Typically they collect 50 to 100 Indian Rupees (approx. 0.62 to 1.25 Euro) in each meeting. During their gatherings, they also discuss general challenges such as health, nutrition or animal rearing, and how those can be addressed. The groups are currently led by an experienced development manager assigned by Bayer. However, the goal is to develop the necessary skills to empower these women to fully manage the groups on their own in the medium-term.

Once the group has accumulated enough capital, the women began providing group members with loans. All the women in the group may apply for loans which are granted based on joint group decision. The loans taken can be applied to address varied needs such as: starting a small-scale business (e.g. a small shop, tailoring or flower business), investing in the purchase of animals, pay for health treatments or the education of their children, wedding expenses, and even the repayment of an expensive loan they had taken in the past.

The capital continues to increase through further savings, interest payments and the repayment of the loans, which affords money lending to additional members – it is a rotating savings and credit system created and run by the local women. The difference between this and other pure microcredit models consists in the accumulation of capital by the women members of the Self Help Group prior to incurring debts which is indispensable for being able to serve future debts. The Self Help Group approach requires that the members are able to contribute savings and reduces the probability that women might run into loans they cannot pay back.

Dr. Harald Strotmann, Professor for Economics, Pforzheim University
Dr. Harald Strotmann, Professor for Economics, Pforzheim University
Dr. Harald Strotmann, Professor for Economics, Pforzheim University

Melinda Schmidt, Research Assistant, Pforzheim University
Melinda Schmidt, Research Assistant, Pforzheim University
Melinda Schmidt, Research Assistant, Pforzheim University

To be able to measure the impact and progress of the Model Village Project and the Self Help Groups, Bayer engaged a team of researchers from Pforzheim University in Germany. This is how we – with two other colleagues – came in contact with this remarkable project. Our academic evaluation is based on the human development and capability approach by Economics’ Nobel Prize Laureate Amartya Sen. We started the assessment of the villagers’ well-being by asking questions about what they perceive to be important in their lives, in which respects they feel restricted and what they require in order to have a better life. To examine possible changes due to the Model Village project and the Self Help Groups, we systematically conduct both individual and group interviews as part of our yearly qualitative analyses. Moreover, we analyze profound quantitative data which we collect over time when interviewing the same households and villagers again on a regular basis. Based on our findings we regularly discuss opportunities for improvement with the Bayer team.

The results from our most recent survey in 2017 show that in the two villages women describe Self Help Groups as being beneficial and well-executed. They appreciate the opportunity to have access to loans and report a strengthened role in the family (72% totally agree, 27% rather agree) and less dependency on their husbands (78% totally agree, 18% rather agree). Additionally, with regards to income generation, some women and their families have also already benefitted from their group membership - they reported increased income after having invested their loans in income generating activities.

In the future, through multivariate analyses based on the panel data we collected, we will examine whether causal effects of the Self Help Group approach at a broader scale can be observed. Some of the results we’ve seen are encouraging, and indicate a positive impact of the project.

One example to illustrate what we observed is the story of a woman who took a first loan of 10,000 INR. With it she purchased 3 goats which allowed her to generate additional income through the sales of milk and the goat’s kids. After repaying her first loan, she took a new and now higher loan to start a bangle and cloth wholesale business; with an additional loan she also purchased a photocopier to offer copying services to the villagers. By today, she has been very successful and has substantially increased her income and her family well-being.

While these developments are very encouraging, we are cognizant of the fact that broader change for the two communities will take time and difficulties may arise. Problems with repayments in times of drought and extreme weather conditions can make it difficult for women to save or to repay their debts on time. Moreover, difficulties to repay the loans may also stem from the use of the loans for consumption purposes that become too high – even if they are considered very valuable by the villagers.

As we conduct the analyses and provide guidance from an academic standpoint to try to make the Self Help Group approach successful, it provides a fascinating opportunity to see theoretical models work in reality. At a more personal level it is a marvelous and unique opportunity to discover how these women try to find a way to their own personal growth and the improvement of their community. There are still challenges to be overcome; yet we remain optimistic as we can observe some soft indications of progress through the efforts these women are making to learn and put ideas in practice for the good of their families and communities.

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