Development of a Housing Finance Triangle
Linking People's Organizations, NGOs, and Commercial Banks
in Developing Countries

by
Hari Srinivas

Note that this Ph.D. abstract is an unedited, unapproved, first/draft version. Many changes were made before its final approval in June 1996. Besides, not all charts/images used have been included here.

The urban poor, with their low incomes, uncertain employment and low assets, have been sidelined by commercial banks who do not find them bankable. In order to rectify this situation, there is a need for a supportive role on the part of the government and commercial banks and a streamlining developmental role on the part of community based financial initiatives. The connecting link between these two actors is the NGO working in partnership with the settlement- based people's organization and with sufficient expertise and commitment to play the role of a mediator, animator and trainer. Together, the three - community groups (or People's Organizations), NGOs and Banks - will form the nodes of a housing finance triangle which will work in synchrony to generate and channel credit to the urban poor.


Abbreviations used:

ICM: Informal Credit Markets
IGP: Income Generating Programmes
MYRADA: Mysore Resettlement and Development Agency
NABARD: National Bank for Agricultural and Rural development
NGO: Non-Governmental Organization
NOVIB: Netherlandse Organisatie voor Internationale Ontwikkelingssamenwerking
P-ORG: People's Organization
PRADHAN: Professional Assistance for Development Action.
RBI: Reserve Bank of India
SEWA: Self-Employed Women's Association.


CHAPTER 1: Introduction

The objective of this chapter is to draw up a basic introduction to (a) the topic (b) the thesis objectives and (c) the contents of the thesis. It contains a brief description of the issues of housing finance in developing countries and the role of informal credit markets as an "alternative". It lays out the fundamental objectives of the thesis research, including what it is not going to do or suggest. An outline of the report as a whole is also presented at the end of the chapter.

Two key facts of urban informal credit markets (ICMs) have been recognized by various authors - one, that informal credit largely (though not completely) serves the differing needs of low-income families; two, that under the current circumstances in which global/national credit markets function, informal credit suppliers function at a disadvantage and have several shortcomings. This situation is compounded by commercial banks which do not find low-income families viable or "bankable" [Remenyi, 1991: x-xvi].

Various approaches have been attempted - from the promulgation by banks of special and targeted credit programmes towards the poor, to active legislation which has attempted to curb the functioning of ICM suppliers [ADB 1990: 193-201, Germidiss, 1991: 50-57, Vincent, 1995: 37-43 and Ghate 1988: 69-71]. This has only worked to adversely affect the credit availability for the urban poor. The basic premise that this thesis stands on is that the functioning of the ICM plays an important and beneficial role for the needs of low-income families. There is a clear match between their credit needs and the quality and quantity of credit supplied by the ICM.

Three problems being addressed here are one, shortcomings in the Bank-urban poor interface, impeding government policies, need for NGOs and people's organizations that encompasses the low-income/low-asset holding position of the poor as well as the perception of banks that the poor are not bankable'. Considering the current state of affairs, there is a need for a supportive role on the part of the government and commercial banks and a streamlining developmental role on the part of the ICM operators [Germidis, 1990: 214-239]. The connecting link between these two actors is the NGO (working in partnership with the settlement- based people's organization)- with sufficient expertise and commitment to play the role of a mediator and trainer. Together, the three will form the points of a housing finance "triangle" which will work in synchrony to channel credit to the urban poor.

Before this can happen, a number of key questions have to be answered. What is the quality and quantity of informal credit provided by ICM operators? What is the viability of its adaptation for credit delivery for low-income groups? Most importantly, which of the informal credit operators are best suited for this purpose? What organizational structures do NGOs take? How can institutions like banks co-opt informal credit suppliers to provide credit for low-income borrowers? If the three actors in the proposed triangle - People's organizations, NGOs and commercial banks - are to come together, what would be the expectations of and from each other? What are the inputs, throughputs and outputs for each actors' decision making process? What structural and policy changes need to be taken for its participation in the triangle?

To summarize, the following will be the goals and objectives of the study:

Goal:

  • To set up an enabling environment so that a housing finance "triangle" incorporating People's Organizations, NGOs and Commercial Banks can function to form a continuous process of credit delivery for low-income households

    Objective ONE: PEOPLE'S ORGANIZATIONS

  • To understand the forces and pressures that are necessary in the formation of a people's organization.
  • To understand the process of informal credit transactions for housing finance.
  • To identify the current shortcomings under which they operate.
  • To explore ways and means by which these can be removed.

    Objective TWO: FORMAL CREDIT INSTITUTIONS

  • To understand the process of credit loan disbursals.
  • To identify reasons for apathy/antipathy towards informal credit markets.
  • To explore ways and means of channeling credit through informal suppliers.

    Objective THREE: NON-GOVERNMENTAL ORGANIZATIONS (NGOs)

  • To understand the process of NGO's operations.
  • To explore means of motivating and mobilizing savings from the settlement residents through NGOs
  • To understand the role of NGOs in improving the functioning of people's organization.
  • To understand the role of NGOs in overall community development.
  • Even though the Triangle's basic purpose is the generation of finance for house building and maintenance, the issues and problems of housing per se are not covered here. The study takes the approach of minimalistic credit' as opposed to credit plus' [Adams, 1984: 8-10] for two reasons - one, the people are capable of taking decisions that directly affect their lives, and hence can digest' credit to their satisfaction, and two, to reduce the scope of the study itself to a manageable level.

    The primary study area is Bangalore city in southern India, with case studies drawn from Bangladesh, India, Indonesia, Sri Lanka and Thailand. Policies and programmes of international NGOs as well as the World Bank and UN Agencies have been adopted, subject to their relevance to overall objectives of the proposed triangle.


    CHAPTER 2: Current Problems

    The objective of this chapter is to develop a characterization of the thesis topic, and place the problems being discussed in an urban poverty perspective. Within the overall sphere of influence of urban poverty in general, the following issues are discussed:
    • Credit policies of the national/state government, the National Housing Policy of India
    • Urban squatter settlements, urban poverty in general, current thinking on the subject and the circumstances that have led to such a situation.
    • Commercial banks, their position and point of view, and their role in providing housing finance in general (including the roles of specialized financial institutions).

    The basic issues to be analysed and the problems being faced is outlined, and a case is made for the need for a "new thinking" on the issue, to be covered in the next chapter.

    The problems being faced in housing, infrastructure, credit, land and other sectors in urban areas of Asia are a result of shortcomings inherent in both the government and its various agencies, as well as the urban poor themselves, who are the focus of this Ph.D. research [Germidis, 1991: 23-46, Remenyi, 1991: 8-13, ADB, 1991: 30-35, Berdard, 1988: 2-24].

    In 1800, only 50 million people lived in towns and cities worldwide. By 1975 there were 1.5 billion, by the year 2000, this will be three billion - more than the entire population on Earth in 1960 [Megacities 2000, 1996: codex.html].

    Due to a variety of push and pull factors, millions of migrants arriving in urban areas find no houses, no water supply, no sewerage, no schools - and are ignored by the authorities. In cities of most developing countries, 30 to 75 percent of the population work and live in squatter settlements [Harody, 1989:118-120, Smith, 1975:80-86, Turner, 1968:356-358, Megacities 2000, 1996: codex.html].

    Such a scenario also has ripple effects on other sectors: education, health, labour/job markets, and economic activity in general. Services provided by the government are insufficient and they do not reach low-income groups forcing such groups to seek alternative means to obtain services like housing, and other network and social infrastructure [ADB, 1991: 235-239, UNDP, 1991: 14-22]. This is done by their own means, often duplicating the distribution mechanisms of the government.

    As a result, two parallel sectors of economic and social sectors have developed. A "formal sector" provided for and managed by the government and an "informal sector" which lies outside the purview of the government and serves primarily the low-income groups [Sanders, 1987:232-235, Sanyal: 1988: 68-75, Ghate, 1988:64-67]. While this is a very simplistic explanation, it serves to understand the situation of urban low-income groups.

    An example of such economic duality is the existence of a "formal" and "informal" financial market that provides credit for a variety of purposes, including housing. Informal credit has been serving the needs of the population long before the advent of popular banking system, but a viable definition still needs to be developed [Kui, 1985: 2-10].

    The wide variety of informal finance suppliers vary not only in their organizational and operational aspects, but also by geographical region, share of the financial market etc. But it is precisely this heterogeneity that enables the informal savings and credit activity to profitably reach those income-groups not served by commercial banks and other financial institutions [Das-Gupta, 1989: 8-13, Srinivas, 1991: 44-47]. It is their informaility, adaptability and flexibility of operations - characteristics which reduce their transactions costs and confers upon them their comparative advantage and economic rationale [ADB, 1990: 187-188] Informality is characterized by highly personalized loan transactions entailing face-to-face dealings with borrowers and flexibility in respect of loan purpose, interest rates, collateral requirements, maturity periods and debt rescheduling [Ghate, 1990: 2-4].

    There is a clear need to understand the functioning of these informal systems and the ways in which they have co-opted low-income borrowers. This would help develop effective programmes that target such group and take all local and potential resources into account.

    The informal credit market represents a huge network for the supply and demand of credit outside the purview of the government, estimated by various studies as 33-76 percent of the entire money markets of Asian countries [ADB, 1990: 189]. In the absence of a concerted action and inability of the government to serve the needs of the low-income groups, the key lies in recognizing and supporting the existing network of credit delivery in such settlements and finding ways and means to create an enabling environment where they can function.

    Thus, the question is not "how to link banks and the informal credit market" but "how to create an environment where banks and the informal credit market can link". There is a need to understand the various actors involved in the process of credit mobilization and disbursal, and their actions, motivations and expectations. The interconnectedness of such actors/activities is important to ensure that resources are channeled to the most needy, and overlap, duplication and irrelevant actions are avoided.

    Overcoming existing attitudes and impressions (for example, the poor cannot save' or banks do not help low-income families' etc.) is another critical aspect. Many times, it only requires a change of viewpoint for an actor to participate fully in the development process - thus emphasizing the importance of mediation and consultation between the various actors [Langen and Abels, 1995: 4-10].

    But why are existing efforts to link banks and the low-income groups not working? There are several reasons for this. They represent both shortcomings and weaknesses within banks and low-income groups, as well as misunderstandings in their relationships, which has resulted in mistrust and skepticism between them [Germidis, 1991: 214-215].

    This necessitates the mediation of a third group which would bring them together to resolve the differences: non-governmental organizations or NGOs. A number of successful examples all over Asia illustrate this linking, but most have been few and far in between [Vincent, 1995: 409-419, de Groot, 1988: 23-32, Germidis, 1991, 234-239, ADB, 1991: 100-103]. There is a need to increase such efforts and build on existing resources and efforts already going on to improve the situation and ensure replicability [NABARD, 1992: 1-2, Rajshekar, 1993: 1-2].


    CHAPTER 3: Stimulus for an Alternative Approach: The Informal Credit Markets

    The objective of this chapter is to understand the role of Informal credit markets (ICMs), particularly the community based groups, and the lessons that they can teach in setting up the Triangle. The chapter contains detailed descriptions of the different actors in the ICM: money lenders, ROSCAs/chit funds, pawn brokers, friends/relatives/neighbours, people's organizations etc. An Asian perspective is taken, with further specific details from India.

    Discussions highlight the advantages and disadvantages of ICM suppliers by studying their operational and organizational characteristics, as well as the key implications to the Triangle proposed in the thesis. A review of existing savings and credit programmes as well as its design and development is also presented.

    What are the features of informal credit that make it attractive to low income households? There are essentially 14 such features [Srinivas, 1991:112-116]:

    • It does not require a license - most informal suppliers work without an operating license to supply money.
    • It facilitates very small savings - small amounts that can be saved daily.
    • It is non-profit motivated - profit, if any, is ploughed back into the community and its members.
    • It has strong organizational structures - community initiatives are usually part of the well setup people's organization.
    • It has multiple proprietorship - proprietorship lies not with one or two persons, but the group as a whole.
    • It does not need collateral - collateral and guarantees of repayment is ensured by, for example, peer pressure.
    • It provides localized services - at the door step of the household, or within the community itself.
    • It has specific borrowers identified - most of whom are members of the community.
    • It has personalized services - the terms and conditions under which loans are given are tailor-made to the needs of its members.
    • It has close informational links - between members that ensure repayment.
    • It has high repayment rates - the average repayment rates for informal initiative has been above 95%.
    • It facilitates reciprocation of credit disbursal - there is a give-and-take attitude, where borrowers and lenders interchange their roles.
    • It is not regulated by the central bank - with respect to limits and restrictions, reporting requirements etc.
    • It encourages community participation in other fields of development - the participatory approach of informal initiatives is easily replicable to a wide range of other community development issues.

    There are clearly many important issues in the design of savings and credit programmes that can take into account the organizational and operational features of informal credit operations that would ensure its success. Such suppliers, including money lenders, rotating savings and credit association (ROSCAs), pawn brokers, friends/relatives/neighbours, and community/people's organizations, are discussed in greater detail to glean implications for programme design. Programmes that have successfully managed to incorporate different actors and actions in generating credit are also reviewed, as are policies of international agencies and NGOs in working with local NGOs in developing countries. This lays the foundation for the next chapter where the Triangle framework is developed as a hypothesis.


    CHAPTER 4: Framework of the Triangle

    The objective of this chapter is to identify the basic advantages of the concept of a "triangle" to mobilize finance for housing. It is based on similar triadic cooperative initiatives reviewed in Chapter 4, including those specifically set up for the purpose of credit. The actors involved in the exercise, their actions, problems and pitfalls is outlined. An introduction to the three phases of the Triangle is presented: Pre-triangle development, Triangle development, and Post-triangle development. For each of these phase, the immediate, intermediate and eventual objectives is also be presented. The chapter contributes to basic concepts and validity of the Triangle, and develops a model hypothesis which will be tested in Chapter 6.

    The primary proposal being made here is a model called the "Housing Finance Triangle" where the bank, NGO, and a People's organization (which represents the low-income groups as members), form nodes of the triangle. A number of such basic triangular models form a network. One bank and NGO may "adopt" three to six settlements represented by the people's organization for a number of credit-related activities.

    There are various models of linkages between the three primary nodes. The following models can be observed in India [Nanda, 1994: 4-6]:

    MODEL I: Bank-People's organization with active support of NGO MODEL II: Bank-People's organization MODEL III: Bank-NGO-People's organization
    The most common linkage model in India is where the banks deal directly with individual People's organizations. In case of most of these organizations, the NGO had provided the initial training, guidance to members in organizing themselves into thrift and credit groups. In many cases, the NGO had also provided some initial financial support to these organizations to augment their resources.. The NGO also keeps a watch and ensures satisfactory functioning of the People's organizations even after the linkage. While linkage of the banks is direct with the People's organizations, the NGO has an important role in pre- as well as post-linkage stages. A slight variant to Model 1 is where Banks have provided financial support to People's organizations which had grown almost spontaneously without any intervention of an NGO. The People's organizations were initially setup on the basis of a common activity, problem and took up thrift and credit activities. The cases of such linkages are of course not very common In this model, the NGO have taken the role of a financial intermediary between the banks and a number of People's organizations. The NGOs take up such responsibilities only in respect of the groups promoted/nurtured by them. The NGO accepts the contractual responsibility for repayment of the loan to the bank. In this respect it is an indirect linkage support to the People's organizations. This model is quite common.

    Most savings and credit programmes in India have followed one of three approaches: the top-down approach, bottoms-up approach and the cocoon approach. While the nomenclature is widely used in various fields, its relevance to credit programmes was specifically covered in [Rajshekar, 1993, Vincent, 1995, Nanda, 1994, Germidis, 1990, Gupta, 1987, Timberg, 1984]. Brochures, annual reports and other secondary material, and interviews, personal communications etc. were also used to develop this typology of approaches. The top-down approach are those where the implementing agencies have been the central bank and various other commercial banks and specialized financial institutions. They have designed and developed programmes to link up with local community groups and NGOs [E.g. NABARD, Vysya Bank etc.]. The bottoms-up approach are those where local community groups have attempted to link up with banks and other institutional resources to generate finance [e.g. SEWA, MYRADA, PRADHAN etc.]. The cocoon approach are those where communities have cocooned themselves from any form of external support or influence and generated finance from within their own resources [examples can be found in almost every settlement].

    The fundamental flaw in all three approaches has been the insensitivity of the implementing agency towards the target' institutions or groups. There was no clear participatory decision-making process. Efforts that took the potential resources of various primary and secondary actors into account were lacking, leading to only partial success or lack of replicability. Mediation and consultation would have been useful to generate interest and commitment - missing features in the above approaches.

    The approach being taken here is that of a middle path that incorporates the advantages of the above three approaches and at the same time attempts to mitigate their shortcomings. The role of any one of the primary nodes is to mediate in the problems, shortcomings and mistrust between the other two nodes - and hence the need for a triangle.

    The creation of the housing finance triangle cannot be done in one stretch, but has to be developed in several stages, taking into account the existing problems and shortcomings and the unique situation of each local triangle. The goal of the triangle is to raise the credit worthiness of the low-income groups to a level that makes them attractive to commercial banks and brings them into the mainstream credit market.

    Training for financial/credit activity, education in basic banking procedures, encouraging savings among the members, rotating them among the members to serve those in need of credit and to deposit the savings in banks, are some of the activities of the triangle. Specific inputs can come, for example, from each of the nodes [Srinivas, 1995: 90] :
    • NGOs: management skills, workshops and seminars in financial aspects, training in group dynamics, monitoring and evaluation etc.
    • Banks: Group loans, policy, programme and project implementation, support and coordinations etc.
    • People's organizations: joint liabilities and guarantees, collective savings, leadership, sharing experiences/ideas, information dissemination through meetings, field visits, support and solidarity
    .

    While the above activities are only a sample, it is clear that a number of secondary actors are also necessary that support and supplement the activities of the three nodes. The interlinkages and position of these secondary is shown in the Folding Star. [ Click here for an image of the Folding Star ]. The Folding Star, developed by David C. Lane of London School of Economics, is a tetrahedron framework structure derived from mainstream operational research and management systems simulation techniques [Lane, 1995: 111- 130]. The advantage of the framework is its ability to position actors and interlink them with their roles and activities. It is able to demonstrate, in different stages by folding' over symmetrically, the respective strengths and weakness of a programme - and generate ideas by interlikages between two actors or actions or by the significance of a greater' triangle that may encompass more than one triangle. The star's various points are designated by each actor - which fold over inwards in three stages or levels, so that finally only the basic triad remains. The folding serves two functions - first, it allows the withdrawal of secondary actors from the triangle after they have carried out their activities; second, it strengthens the basic triangle in its simplest form allowing for replicability.


    CHAPTER 5: Validation from the Field

    The objective of this chapter is to analyze the opinions of structured interviews made during the field study. An analyses of the opinions, their relative effect on the structure of the Triangle hypothesized in Chapter 5. Opinions on existing savings and credit programmes that followed the three approaches - top-down, bottoms-up and the cocoon approach were also solicited. Practical considerations and opinions by actual actors will be used in later chapters for developing the Triangle. During the field work, conducted in Bangalore, India during November-December, 1995, the following respondents were interviewed for their views: bank managers, NGOs, people's groups leaders, social workers, academicians, researchers and consultants.

    A total of 12 programmes were evaluated for their organizational and operational features. Their interlinkages with actors and actions was overlaid on the hypothetical Triangle of developed in Chapter 5. Three examples of an NGO, Bank, and people's organization is presented here.

    Besides validating the Triangle, the field work highlighted many important components of the Triangle:

    The three nodes are functioning organizations and hence need to develop specificity in their participation in the Triangle. Thus -
    • The P-ORG should have a credit front' facing the triangle with sensitized members, trained leaders and staff. The other activities of P-ORGs would include income-generating projects (IGPs), education, health, sanitation.
    • The NGO should have a savings and credit front' facing the triangle, with trained professional/motivated field staff and resources. The other activities include IGPs (training, workshops, meetings), education, health, sanitation etc.
    • The Bank should have a low-income groups front' with an Urban Technical Officer who works as an interface between the bank and the Triangle.

    In activating the nodes, it is also important to understand the external factors that affect and influence its functioning and participation. Two main components of the people's organizations activities which have to be extensively supported by both NGOs and banks are its organizational development and the savings and credit programme.

    Organizational development Savings and credit programme
    leadership identification and training; organizational bye-laws and constitution; procedure for group/community meetings; communication methodologies; vision/goals development; decision-making process and responsibilities etc. credit loan terms and conditions, (from internal savings, from bank's group loans, from equity participation); grants from NGO for development; training in financial management (book keeping, records etc. ); dispute resolution, auditing and reporting, evaluation and monitoring etc.


    CHAPTER 6: The Three Nodes: Banks, NGOs and People's Organizations

    The objective of this chapter is to outline the roles being played by each node of the Triangle: the Commercial Bank Node, the NGO Node and the People's Organization node. It also aims to understand the dynamics of the interrelationships between the three nodes of the Triangle from monadic, dyadic and triadic view-points.

    The potentials and pitfalls of each node, commercial bank node, NGOs node, and the People's Organization node, is presented within their current organizational and operational setups. The role and contribution of the actors, their spheres of influence, the secondary actors and policies/programmes that affect the nodes and the Triangle as a whole is covered.

    The three dyads in the Triangle, the NGO-People's Organization dyad, the Bank-NGO dyad, and the People's Organization-Bank dyad are analysed. Its shortcomings are brought out and ways and means of reducing them are explored. This understanding is then elevated to a triadic one by combining the three dyads.

    An interesting feature of the triangle that emerges is the existence of greater triangles' within the triangle framework. This concept of greater triangles is useful in defining the role and focus of the secondary actors in the third and second levels. There are three such greater triangles, each of which relates to one of the primary nodes:

    The P-ORG Greater Triangle The NGO Greater Triangle The Bank Greater Triangle
    This triangle consists of the bank staff training colleges, the national central bank (Reserve Bank of India) and various specialized financial institutions. The key input that these secondary actors provide is that of advice and counsel with an aim to incubate development of the people's organization as a viable community finance organization. This triangle consists of the Urban Development Boards, Slum Clearance Board, and governmental and legislative bodies. The key input that they provide to the triangle is support and relief. The aim of these secondary actors is to support the community development initiatives of the NGO. This greater triangle consists of community networks, the International NGO, and various research and training institutions. The key input that these actors provide the commercial bank is negotiation and reconciliation with an aim to mediate with commercial banks to induce their participation and support the people's organization in order to be pro-people'.

    The development of the triangle is a gradual process that develops trust and confidence among the various primary and secondary actors to participate fully and perform their roles optimally. With this in mind, the development process is divided into three stages, which synchronizes with the three levels of the secondary actors in the triangle. The three stages are: initiation, consolidation, and institutionalization. [ Click here for an image of the three stages. ]

    Stage I: Initiation

    In stage one, the triangle is fully open with all actors participating. The primary focus of this stage is on savings. As the community organizationally develops, it has to demonstrate its ability to save regularly into a central fund that is created at the community level (with Savings First!' as a slogan). The NGO may provide block grants to this central fund, either to raise the equity levels, or to fund developmental activities of the community. Thus the NGO also focusses for its part on social welfare issues to raise awareness and increase participation among the community residents. At this stage, the bank is an observer, watching the proceedings of community development and understanding the dynamics of mobilization.

    Stage II: Consolidation

    During the stage of consolidation, the community has metamorphosed into a people's organization with regular meetings where discussions and decisions are taken care of, and the future activities are charted. In the Triangle, the Level 3 actors will have folded over Level 2, leaving the Slum Clearance Board and the International NGO as secondary actors. With further increase in the central funds of the organization, small loans are now made to members in need of finance. The focus of this stage is to develop the credit-worthiness of the members. The NGO plays the role of a mediator bringing various actors together to interact with the people's organization. The bank upgrades its role from that of an observer to a supporter. It helps in the loan making process, keeping records and advises in disputes etc.

    Stage III: Institutionalization

    Here the level 2 actors will have overlaid on the level 1 - leaving only the primary three actors in the triangle - the people's organization, NGO and the bank. As the NGO withdraws, only the link between the bank and people's organization remains. The focus of this stage is on making the people's organization bankworthy. The NGO has begun to gradually withdraw and is only involved in consultations with the people's organization and the bank. The bank itself has upgraded its role from that of a supporter to a participant - it now makes group loans to small groups of five to ten borrowers simultaneously when loan sizes are small and are for upgradation, repairs, maintenance purposes. On recommendation from the leaders of the community, it may provide individual loans directly to member when they are sufficiently large, for example for capital investment in microenterprises.

    The vision that this research stands on is the fact that the poor will never remain poor for ever. Personal and community economic development will take place, sufficient to a position and level for them to be able to purchase the kind of lifestyle they aspire for. With this in mind, the process of concretization of the triangle envisages its development as a neighbourhood bank, incorporating all the unique features it evolved from, but sufficiently institutionalized to satisfy the banking rules and norms prescribed.

    Ordinary commercial banks can then take care of large loans and investment portfolios, leaving the day-to-day money and credit matters to the neighbourhood - much as a supermarket caters to bulk and speciality goods, and the corner convenience store to quick daily needs of a household. If we were to develop the conceptual 'becoming' of the neighbourhood bank, then the before image below would show the existing situation before the Triangle starts to function, where banks cater to the higher income groups and the lower income households resort to the informal sector for their credit needs; and the after image would show the institutional realignment after the Triangle has completed its functions, where the 'higher' and 'lower' income groups are replaced by the 'middle' income group, and neighbourhood banks cater to the immediate day-to-day needs. [Click here for the 'before-after' images]
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    Hari Srinivas - hsrinivas@gdrc.org
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