Mysore Resettlement and Development Agency (MYRADA)
Mysore Resettlement and Development Agency (MYRADA) is an NGO that has had extensive experience in incubating, developing and managing savings and credit programmes in Southern India. Realizing the shortcomings and inadequacy of the existing system of delivery of formal credit the poor, Myrada experimented with many local institutional arrangements in providing credit delivery systems to the very poor. These included local cooperatives, rural bank branches, Voluntary Development Agencies etc. One common feature that ran through most of these earlier approaches/models was that the target community formed a group, from 15-20 each to the entire community.
As experience mounted, ideal characteristics of a workable group formation strategy emerged: small size, voluntary participation, high initial intervention by NGO, economic and social homogeneity, effective, decentralized and democratic participation, basic knowledge in literacy and numeracy, etc. This was later concretized by forming of Credit Management Groups (CMGs) Such groups helped not only in the usual 'backward and forward' linkages, but in sideways linkages as well - that is, support from a group to a family to become economically viable and self-reliant. Asset management was also better administered by groups rather than the individual family or household. Savings from the group was a critical starting point for all activity, creating self-confidence among other things, among the members. More than 4,000 such homogeneous small groups have been formed by MYRADA in South Asia.
MYRADA's Common Fund
The common fund (CF) receives cash receipts from membership fees, savings, donations, fines, and loan recoveries, while cheque receipts include institutional contributions from MYRADA, CAPART, NBARD and commercial banks. A major part of the CF is held in a bank account opened in the groups name. All withdrawals by cheque is based on meeting resolutions. A small part of the CF is held in cash to advance emergency loans, besides loan recoveries that are to be deposited in the bank. Cash advances are based on meeting resolutions or ratified in case of small emergency loans. Cheques payments are made for refund of loans to institutions, loans to beneficiaries, payments for assets of members that were purchased in bulk etc. while cash payments are made for loans to beneficiaries and to meet incidental expenses.
These autonomous and voluntary groups fostered the emergence of innovative, appropriate and replicable ideas on a continuing basis by providing the people opportunities to come together and to share and learn from each other's experience. Latent values of group support, traditional to most societies, came to the fore with such groups.
A key feature of the savings and credit programmes of MYRADA is the Group's Common Fund (CF). Membership fees, regular savings, fines imposed for not having satisfied limits in savings or loan repayment, interest payments and other sources are used to build up the fund. The CF also demonstrates the Group's seriousness in credit management. This is used to convince Banks, and other financial institutions to lend to the group who will then onlend, in small amounts, to its members. Loan disbursal/recovery, terms and conditions etc. are decided by the group itself, with advice in training, suggestions from NGOs and Banks etc. Figure 5.3 explains the growth and utilization of the CF within a group.
The significance of MYRADA's programmes can be seen in the involvement of all three primary actors of the Triangle for group loans, deposit mobilization, formation of small groups (in three stages: 'formation', 'stabilization', and 'empowerment'), sensitization and training of bankers etc. Roles are also provided for the international NGO and research and training institutions for monitoring and evaluation, grants and loans, information sharing etc.
Some of the defining characteristics that ensured successful management of the group included:
- Participation: Effective participation in meetings, credit management etc was possible if the groups are small, with 20-30 members.
- Regular savings, size of loans, schedules of payments and recoveries, interest on loans etc. were decided by the group itself.
- Sanctions/fines was found to be an effective measure to avoid 'deviant behaviour'. Most were monetary fines, but serious cases were expelled from the group. All fines were credited to the group's common fund.
- Economic status of members - Loans and savings were offered only to the very poor. Well-off farmers or those who had progressed as a result of the group's assistance, were allowed to be part of the group in an advisory capacity, but were not eligible for loans.
- Office bearers were usually elected for one year only, to avoid consolidation of power. They were elected well in advance so that training could be provided to them by MYRADA staff.
- Meetings were critical and attention was paid to its frequency, schedule and attendence (weekly meetings, fixed day and time, attendence register etc.)
- Rules governing conduct, behaviour, management of finance and activities etc were framed by the group itself.
- Common funds that revolved briskly was an indicator of a "good" group - thus it was not the amount saved in a fund, but its circulation that was a good indicator.
- Records maintained by the group indicate the degree of transparency adopted by its members: attendence register, meeting minutes register, savings ledger, members pass book, receipt and payment vouchers, cash book, loan ledgers etc. were some of the records kept by the group.
- Aloysius Fernandez (1994). The Myrada Experience: "Alternate Management Systems for Savings and Credit of the Rural Poor." Bangalore: Mysore Resettlement and Development Agency (MYRADA).
Contact Address: MYRADA
2, Service Road,
Bangalore - 560 071, India
Hari Srinivas - firstname.lastname@example.org
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