Women’s Empowerment Program in Nepal
A Savings-and Literacy-Led Alternative to
Financial Institution Building
Jeffrey Ashe
Visiting Scholar
Institute for Sustainable Development
Heller School, Brandeis University
Lisa Parrot
Technical Advisor in Microfinance
Freedom from Hunger

Pact’s Women’s Empowerment Program (WEP) strengthened the capacity of 6,500 savings and credit groups comprising 130,000 women members in rural Nepal. All of these groups started their training within months of beginning field operations. How WEP reached so many groups so quickly, the quality of the groups it trained, and the impact WEP has had on the women who are members of these groups is the subject of this evaluation. USAID’s Office of Microenterprise Development, Freedom from Hunger, the Overbrook Foundation, and the Small Enterprise and Education Promotion Network (SEEP) financed the study.

Time-limited catalyst of group development

WEP’s goal was not to create a permanent sustainable financial institution—it doesn’t even have a loan fund. Rather, its objective was to serve what best can be described as a time-limited catalyst of group development by helping thousands of groups evolve into well managed, member-controlled savings and lending organizations, with literacy training as a fully integrated and central component. This is village banking, but without the external loan fund. The approach is similar in its spirit to early credit unions but with crucial differences:

  • WEP groups are smaller, with 21 members on average.
  • The groups operate completely below the regulatory radarscope.
  • The model is simpler and based on village banking and local savings and credit group traditions.
  • Literacy training is built in.
  • Leadership is from within the group and all members are women.

WEP is time limited: it had less than three years to train the groups before the grant ended and it withdrew its staff from the field. It is a catalyst of group development in that it works through thousands of community groups—set up for literacy programs, irrigation and many other purposes—that were recruited into WEP by 240 NGOs, cooperatives and MFIs that became WEP’s partners in carrying out the initiative. Using existing community groups and developing systems to operate effectively and efficiently through large numbers of local partner organizations were the hallmarks of the approach.

The results documented in the study are substantial:

  • The groups mobilized nearly US$2 M for their group funds at the rate of a dime to a dollar per month. These funds are expected to grow to up to US$ 3 M dollars by July 2002.
  • Virtually the entire amount of the funds is on loan to more than 45,000 group members with loans averaging $39.
  • Only 4% of the groups have made a loan that defaulted.
  • More than 74,000 women have learned to read.
  • Most women have substantially increased their level of decision making in the household
  • The groups have taken on more than 100,000 community projects and campaigns, reflecting WEP’s literacy, empowerment and community activism objectives.

Decentralization and local control

Over the past decade microfinance has evolved rapidly in the direction of ever larger, more centrally controlled and better managed institutions in order to reach scale, cover costs and evolve into commercial financial institutions—a major achievement for a field that gained prominence little more than 20 years ago. WEP has also reached substantial scale, but by taking exactly the opposite approach: by virtually complete decentralization and local control. These two fundamental building blocks of WEP’s approach help explain why the women take their responsibility for managing their groups so seriously.

WEP is successful in large part because each partner is asked to do only what they are capable of doing. NGOs are not asked to become MFIs; but rather are only asked to recruit groups, distribute materials, provide support and some basic training. The groups, for their part, are only asked initially to upgrade their traditional record-keeping systems, increase their savings and improve their lending practices, not adopt a new group model, which would have required much more training. (Village banking was introduced later in the program for those that were interested in meeting weekly and saving at a higher rate).

WEP has been the essential catalyst in this process. It secured the funding; provided the model and the curriculum; recruited, trained and supervised the local partners; and conducted the more advanced training to the groups. It was WEP that stitched together the essential elements of the program and then withdrew with good reason to expect that the groups and local partners would continue and doubtlessly evolve. WEP’s success, of course, must ultimately be judged in terms of the number of groups that are still saving, lending and growing their group funds in the years to come.

Financial institution building vs. group strengthening

The financial institution building and group strengthening models each have their advantages and limitations. Under the WEP model it takes a group considerable time and effort to build a substantial loan fund. This model is best suited to “horizontal” expansion: the creation of very large numbers of groups that provide simple credit and savings services. In contrast the MFI model requires an extraordinarily high level of organizational competence to reach substantial scale since the basic objective is to transform an NGO with an NGO mission into a bank, but it can extend larger loans to clients more quickly and can also offer a wider range of services.

Considering the vast number of self-help groups and ROSCAs in villages of the developing world, a strategy that can transform these groups into well-managed, local savings and credit organizations has considerable appeal. This model, which is based on teaching and facilitating (which are common skills for NGOs), sidesteps the entire problem-fraught issue of creating a permanent and sustainable financial institution. Building autonomous groups may also prove to be a preferable strategy for reaching large numbers of the rural poor in the poorest countries where financial institutions are weak and illiteracy high. The demand for these services could reach the scores of millions, with at least one million in Nepal alone.

Like any new approach, further work is needed to perfect the model, which only now is being clearly defined. The first need is for more research. Will the process of spontaneous expansion, where existing groups and local NGOs create new ones on their own account, continue to accelerate, and how could nominal funding ensure that expansion will continue at minimal additional cost? What has been the experience of other initiatives using similar methodologies? CARE’s work in Niger and NABARD in India, which works through nearly 400,000 self-help groups that are supported by 750 NGOs, come immediately to mind.

On the operational side, Pact’s current literacy curriculum needs to be simplified, based on the knowledge gained over the past four years, and operational manuals developed so that the development community has a useful set of tools for replicating the model elsewhere. New initiatives also need to be funded and tested to move the level of knowledge forward.

The authors believe a strong case can be made for continuing to develop and perfect this model given the growing number of poor families in the world and the potential that this approach has to reach substantial scale quickly under difficult conditions.

The complete study and the two questionnaires developed for the study, which measure the strength and performance of the groups and the impact at the individual level, are based on the AIMS tools and are now available on request: from JAAshe@aol.com.

Download the full paper in MS Word format

Hari Srinivas - hsrinivas@gdrc.org
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