The SEWA Bank

A women's self-help organization for poverty alleviation in India

The problem

Access to finance is a major problem for poor women and in particular for poor self-employed women in developing countries such as hawkers, vendors, home-based workers, manual labourers and service providers. Because they do not save, emergencies and obligations often force women to borrow heavily. However, they are unlikely to have the required experience and self-confidence to obtain credit from a financial institution in the formal sector, while the institution's regulations and procedures rarely meet the needs and conditions of the woman seeking a loan. Therefore, poor self-employed women often depend on informal money-lenders, contractors and wholesalers who charge exorbitant interest rates: rates of 10 per cent per day to 10 per cent per month are common. This is usually the start of a downward spiral of increasing indebtedness.

The Shri Mahila SEWA Sahakari Bank

The Self-Employed Women's Association (SEWA) was established in Ahmedabad (India) in December 1971 and registered as a trade union in April 1972. In 1974, 4,000 self-employed women established the SEWA Bank as a cooperative bank with the specific objective to provide credit to self-employed women with the view to empower them and reduce their dependence on money sharks. The self-employed women are the bank's share-holders who meet every year. There are regular elections for positions on the Board on Directors which sets the policies of the bank and sanctions all loans. The bank is professionally run by qualified managers hired by the Board and its operations are supervised by the Reserve Bank of India.

Between 1974 and 1977, the SEWA Bank concentrated on attracting deposits from self-employed women and served as an intermediary to enable depositors to obtain loans from nationalized banks which are required to lend to the poor. During this period, about 6,000 members received nearly Rs 2,500,000 in credit. Initially, the nationalized banks charged 9 - 16 per cent interest, but they reduced the rate to 4 per cent as a result of SEWA's lobbying with the Government. In 1976, the SEWA Bank started to extend loans to its depositors from its own funds and gradually withdrew from the credit arrangement with the nationalized banks.

The SEWA Bank as of March 1995
Number of womenAmount in Rs
Loans 22,538100.0 million
Savings accounts46,92470.6 million
Working capital-96.7 million
Surplus-1.5 million

Loan schemes

The SEWA Bank works only with poor women and loans are only available for economic activities and not for personal use. The bank employs woman savings mobilizers to encourage women to save with the bank. The mobilizer visits women at their homes or workplaces so that they can easily deposit their savings. When she needs a loan, the applicant usually comes with a reference person, already known to the SEWA Bank, and if it is the woman's first time to the bank, she will also be accompanied by some other family member or friend. Applications for loans are made by the members themselves or through the bank's field staff.

The bank scrutinizes and processes the application by carefully reviewing the applicant's income-generating ability, financial status, soundness of working conditions and ability to repay. The information is discussed in a loan committee which submits its recommendation to the Board. The majority of the loans are unsecured; their approval process takes about one week. If the woman has jewellery to offer as security, a fixed deposit or a mortgage, the approval procedure is shortened and she can get a loan the same day. Once the loan has been approved, the borrower is required to buy 5 per cent of the loan amount in bank shares and to open a savings account if she does not yet have one. Women are encouraged to register their savings account and their assets (such as working tools, house or land) in their own name.

There are no subsidies or grants; the Bank borrows and lends at market rates. The Bank provides loans with a repayment period of three years for productive purposes. At present, the Bank lends to its members in three major areas:

The first step is often to extend credit to highly indebted women so that they can release themselves from the high-interest debts with money-lenders: the woman moves from being indebted at a high interest rate from private sources to being indebted at a lower interest rate to the Bank. Once she is free from the exorbitant interest rate, she has gained some bargaining power with her suppliers. The second step for the woman is to use her new credit productively so that she generates more income which she can use to repay the loan and build up working capital. Before borrowing, while repaying and after repayment, SEWA encourages its members to save.

Around 10 per cent of the women face difficulties in repayment each month. Most repayment problems occur in times of crises. SEWA has learned that providing support at these times rather than harassment strengthens the Bank's image as a friend of the poor and results in better repayment than legal recourse or threats could do. The SEWA Bank is flexible in helping a woman reschedule her instalments when these crises occur.

The impact of the SEWA Bank

The SEWA Bank has broken the vicious circle of indebtedness and dependence on middlemen and traders, and this has increased the bargaining power of the women. They can now organize themselves, bargain for better prizes and form their own economic units such as cooperatives. However, the bank has not only enabled its members to come out of the clutches of money lenders, but also to develop the skills necessary to deal with formal financial and other institutions. Gradually, the members are being trained in the habit of banking and this inculcates a sense of thrift: they learn to make a more productive use of their money. In the process, their self-confidence is enhanced. The SEWA Bank is providing the badly needed banking infrastructure which can serve the self-employed and the small businesses. A large number of the members now have their own hand-carts, sewing machines, looms and tools for carpentry and blacksmithy. Many of them have upgraded their skills, developed more business and increased their income.

Access to financial resources not only ...
* enables women to earn a higher income and have control over their money
* integrates self-employed women in the economy
* provides adequate shelter and space for production and storage and thereby alleviates their poverty
* enables women to own tools and other means of production
* enables women to urgrade their skills, improve their business and increase their income
but it also ...
* builds self-esteem and self-confidence among women
* improves the health, nutrition and education of the women and their families
* raises the status of the women in their communities
* increases entrepreneurship among the women
* builds individual and collective capital
* promotes assets creation


Hari Srinivas -
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