Swabhimaan — one year on

March 12, 2018
By Rang De Team
Smita Ram, the managing trustee and co-founder of Rang De, addresses the first borrowers enrolled under Swabhimaan at Yeshwantpura village in Kolar district, Karnataka.

The Women’s Day celebration on 8th March 2018 was special for us here at Rang De, as we spent it with our borrowers in Yeshwantpura village in the Kolar district of Karnataka.

It was exactly a year ago, on 8th March 2017 that we launched our first Swabhimaan Kendra in Yeshwantpura village. A year down the line, it was interesting to see how things have progressed.

The premise behind the Swabhimaan was simple — we wanted to offer low-cost, collateral free loans to rural borrowers with one significant change. The provision of loans would directly be linked to the outcome of a financial literacy test and assessment, and the process of disbursal and collection would be entirely digital.

In a region where most of the families were used to borrowing money from Microfinance Institutions (MFIs) and informal sources like moneylenders at high rates of interest and where almost all the financial transactions took place in cash, this was asking for change of a tall order.

One year on though, the results are promising. Over the course of a year, 141 financial literacy assessments have been conducted at the centre in Yeshawantpura, out of which 124 borrowers have successfully passed the test. Ultimately, 69 borrowers, all of them women, have qualified for the low-cost loans.

Based on the various data points collected from the borrowers at the Swabhimaan kiosk — the purpose of the loan, the amount required, previous financial history — the borrowers can be disqualified from receiving a loan. During the assessment, we ensure that the reason for disqualification is conveyed to the borrowers, so they can make a successful application the next time around.

Till date, over Rs 11 lakh has been disbursed to the borrowers in Yeshwantpura through the Swabhimaan Kendra.

Challenges & Learning

Lakshmi had a sore throat that afternoon, but she still took to the mike to voice her concerns about the loan repayments “We are facing a lot of problems with the ECS. The money is not being deducted from a lot of our accounts” she said.

Lakshmi, our borrower in Yeshwantpura, voices her concerns about the ECS used to pay the monthly installment of the loan

Lakshmi’s complaint was preceded by a long vote of thanks: the rates of interest on the loans offered by Rang De were the lowest in the area, she said. The money had helped many women meet urgent expenses: the education fees of a child, a down payment for a small business, or buying basic agricultural equipment. More importantly, it was the first time the women were exclusively dealing with women field officers. Most other MFIs exclusively employed men.

But the issue with the ECS (Electronic Clearance System) was urgent, and needed to be resolved.

To our ears, Lakshmi’s complaint was a welcome sign of progress. A year ago, many of these women held bank accounts that saw little or no transactions. They borrowed money from the MFIs but had no idea about the consequences of the interest being charged, or how the whole process of applying for a loan worked. The financial institutions remained distant and intimidating.

A year later, things have definitely changed.

Amoghavarsha P, the finance officer at Rang De, allayed the concerns of the borrowers. The ECS was operated twice a month: once at the beginning and once mid-way, around the 15th. If the adequate balance was not maintained in the account, the ECS installment would bounce, he said.

A lot of borrowers missed the monthly instalment because they put in the money too late. Some of them, fearing that double the amount would be deducted in the next instalment or that a penalty would be charged, withdrew all the money from their account.

“A missed installement stays missed. It isn’t going to be collected the next time” Amogh told the borrowers. In any case, any outstanding issues with the next payment would be resolved next Friday, when the weekly field visit to Yeshwantpura was due.

Ensuring financial discipline, making sure the passbooks are updated, ensuring the documents required for the bank account are in order. These are just a few of the problems we have been resolving over the past year.

Bringing about change is slow but there is progress.

Amoghavarsha P, the finance officer at Rang De, explains the mechanism of the ECS to our borrowers

Financial literacy and the path ahead

The crux of Swabhimaan is the financial literacy module. The women are offered lessons at the community centre and then take a digital test at the Swabhimaan kiosk. If they pass the test, they apply for a loan, which is approved after assessment by the machine and inputs from the field officer.

The entire process, from start to finish, is entirely digital.

Another interesting feature is that the Swabhimaan app uses IndiaStack and Aadhaar to verify the identity of the borrowers.

By linking the monthly repayments with the Aadhaar verified bank accounts, we want to build a credit history for each of our borrowers. Over the course of the next few years, the aim is to transition these borrowers to the formal financial system and services.

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There are a lot of challenges on the path before that can happen, but interacting with the women borrowers in Yeshwantpura proved to us that we are on the right track

Women’s Day celebration at Yeshwantpura village in Kolar, Karnataka.