Microfinance won’t work in an urban context. Right?
Since early-2007, when I started spending time with NGOs, and in the field, I’ve been repeatedly told that micro-finance won’t fly in an urban setting. Many reasons have been proffered – that SHGs can’t be formed due to group heterogeneity, that peer pressure is not strong enough to guarantee repayments, etc.
So, when Vineet Rai( CEO of Intellecap & Aavishkar) introduced me to Aajeevika, which works at Holambi Kalan and Bawana, in Delhi, it was nice to see this myth being broken.
At Holambi, a resettlement colony in North-West Delhi, Aajeevika has over 1500 ‘loan-members’, across 150 ‘centers’. This approach bypasses the traditional rural SHG model completely, and has a zero incubation period. Prospective members are administered a ‘Group Recognition Test’ to determine whether group dynamics within the ‘center’will work out fine. Starting with loan sizes of Rs 1500/- to 2000/-, these gradually increase to sums upwards of Rs 5000/-.
I had the opportunity to spend time with several ‘centers’.
Each ‘center’ has a fixed, weekly time for its meeting, and members adopt all its rituals, including punctuality and an ‘oath’( where they re-affirm their commitment to each other, and to repay any loans taken).
At one of these ‘centers’( “AHP2018”), Center Manager Madhuri discussed loans that various members wanted; Rajvanti wanted Rs 8000/- for building her house, Malti for her vegetable shop expenses.
One interesting encounter was with Kunti Devi who wanted Rs 5000/- to buy a machine for her husband’s welding shop. I had the chance to talk to her husband, Dileep Sharma, as well, and ask him about his feelings regarding his wife’s use of microfinance to fund his business. It was nice to see him being completely open about this.
MFIs like Aajeevika completely recognize that members will often use these loans for non-productive or consumption-linked purposes. For instance, Rajvanti had earlier taken a loan for building a house, but used it meet expenses relating to her son’s illness.
All in all, it was nice to see one more myth being broken. Innovations and progress in the social sector will require us to demolish many more myths ruthlessly.
