Hijacking credit

from Frontline

R. KRISHNAKUMAR

The Congress’ microfinance organisation is seen as having been designed to scuttle the State government’s Kudumbashree project.

Union Finance Minister P. Chidambaram inaugurating the Janasree Mission in Kochi on February 2. Others from left are Congress leaders Oommen Chandy, M.M. Hassan, K.V. Thomas and Ramesh Chennithala.

STRANGE as it may seem, the Congress is venturing into the world of microfinance, of all places, in Kerala, a State where a successful microfinance-linked poverty alleviation programme under the Left Democratic Front (LDF) government has already been attracting attention as a development initiative worthy of emulation.

The State government programme Kudumbashree is set to enter its tenth year soon. It has been running through a network of highly motivated and efficient neighbourhood groups of women, with microcredit, entrepreneurship and empowerment as its key components, and, uniquely, under the guidance and support of the local self-governments.

However, now, Janasree, an organisation floated by some members of the Congress in Kerala a few months ago and whose real nature and deeds could barely be discerned until now, has “arrived” as an “independent alternative”, or so its organisers want the people of the State to believe.

Despite opposition to such a movement from several quarters within the State unit of the Congress itself, Janasree’s formal inauguration was held almost as an official programme of the party at the Rajiv Gandhi Indoor Stadium in Kochi on February 2, with senior leaders and party supporters from many districts taking part in the function.

Union Finance Minister P. Chidambaram, who “inaugurated” the Janasree Sustainable Development Mission and the Microcredit Summit chose to describe it as “Kerala’s largest microfinance organisation”, a description that was not taken kindly to in the State. Surprisingly, he also chose to downplay the reality of the domineering spread and importance of the State-supported microfinance movement. Kudumbashree is already well-entrenched in Kerala and has functioned uniquely as an appendage of the local bodies in the service of the poor and as a conduit for poverty alleviation and other development programmes sponsored by the Central, State and local self-governments. From its very inception, Kudumbashree stood apart from the microfinance delivery mechanism through non-governmental organisations (NGOs) prevalent in many other States.

However, in the presence of Opposition leader (and former Chief Minister) Oommen Chandy and Kerala Pradesh Congress Committee president Ramesh Chennithala, Chidambaram claimed that in the “11 months of its existence”, the new “movement” already had “30,000 sanghams” (neighbourhood groups) under its umbrella and that by the end of March it would be “the largest microfinance organisation in the country” with “50,000 sanghams” and a membership of “10 lakh”. There was no clue from the organisers, however, about the kind of service that these sanghams had rendered in the State in the 11 months or whether they had provided microfinance or entrepreneurial assistance to the poor people of the State so far.

Controversially, at the inauguration, Chidambaram also asked nationalised banks and other Central government financial institutions to provide Janasree the same support that they have provided so far to neighbourhood groups (NHGs) under Kudumbashree, alternatively known as the State Poverty Eradication Mission, and was originally launched as part of the most successful decentralisation experiment in the country in 1998.

“We have nothing against any government programme. I know that in Kerala there is a programme called Kudumbashree that is supported by the State government. That programme does not belong to any party or Front. We wish it all success. But there is no reason why citizens’ groups, voluntary agencies or any such organisation cannot promote microfinance groups. While banks will continue to support Kudumbashree, banks will also support Janasree. I promise you that Janasree will receive the same support from the banks as Kudumbashree and other groups do today,” the Minister said to loud cheers from Congress workers at the stadium. Also present were National Bank for Agriculture and Rural Development (NABARD) Chairman U.C. Sarangi and representatives of various other banks in the country who participated in the Microcredit Summit. “I am told that banks have already credit-linked 10,000 of the 30,000 Janasree groups. By March, banks would have credit-linked 30,000 Janasree groups,” Chidambaram said.

Justifying such an offer of support for new microfinance initiatives, he said that benefits from the economic growth the country was witnessing were not reaching a large number of people because over 50 per cent of them still remained outside the financial system, with no bank accounts and no way to deposit or borrow money. This is where the Central government saw a role for microfinance institutions.

But the situation in Kerala, a State where banks have achieved “total financial inclusion”, was different. A constant critique in Kerala (especially from the Left parties) about these microcredit delivery mechanisms recommended by the Union government had been that they were part of an agenda of globalisation propagated by international lending agencies for weakening the role of democratically elected governments and routing development initiatives through NGOs.
Kudumbashree success

Therefore, when the Kudumbashree microcredit neighbourhood group initiative was launched by the then LDF government as part of the decentralisation process in 1998, it was conceived not as an agency independent of the government but as an integral part of the local self-governments under whose guidance and monitoring the NHGs would operate but with the flexibility and freedom to make their own decisions and choices.

The thinking in the government then was that the way forward was not the dismantling of the traditional, not-so-successful, anti-poverty programmes completely and their replacement by the self-help group (SHG) model of delivering anti-poverty assistance independent of the democratically elected governments, but the creation of a new model where all these factors converged and took into consideration the peculiar nature of the State’s development history itself.

As State Finance Minister T.M. Thomas Isaac, a key architect of the decentralisation campaign, explained in an article on the NHG programme later, Kerala is one State that has succeeded in reducing poverty to a large extent as a result of various development initiatives over the years – such as land reforms, public provisioning of education, health and other social services, creating a public distribution system that has universal coverage and, of late, ensuring community participation in development activities through decentralised planning – and not as a result of targeted poverty reduction programmes. The question before the planners was how to integrate the new phenomenon of microfinance-led SHG initiatives into this general Kerala mould, in order to keep them as an integral part of the decentralised governments for effective delivery of services to the poor instead of leaving them to NGOs without any scope at all for social audit or control.

Chidambaram said that India today had the largest microfinance movement in the world with 30 lakh NHGs through which banks had disbursed nearly Rs.18,000 crore. Of this, Rs.800 crore was disbursed in Kerala though 1,19,082 NHGs. Though he failed to mention it, this achievement was mostly through the Kudumbashree NHGs that worked in tandem with the local bodies and earned the trust of the financial institutions by proving their group credit-worthiness through prompt repayment of loans and delivery of services.

Kudumbashree was established “to eradicate absolute poverty in ten years through concerted community action under the leadership of local self governments, by facilitating organisation of the poor for combining self-help with demand-led convergence of available services and resources to tackle the multiple dimensions and manifestations of poverty holistically,” as the now-famous mission statement says.

Within a short time, the Kudumbashree NHGs, working well within the panchayati raj system, became a basic unit of the community structure in Kerala instead of remaining a mere microcredit organisation. It evolved not as an alternative but as a confluence of traditional poverty alleviation schemes and social banking structures. The crucial factor in this was the decision to link Kudumbashree with the gram panchayats.

And, remarkably, Kudumbashree began to position itself as a deliberate alternative to the microfinance model recommended by global financial agencies and adopted for implementation through NGOs by the Central and other State governments. It was an experiment that created an empowering unity of poor women as key links in the process of democratisation and decentralisation that took place in Kerala in the past decade.

Kudumbashree was a revolution in women’s empowerment in Kerala. Women who confined themselves to their homes became bold entrants in the public sphere through empowerment initiatives of the Kudumbashree movement. The poor were finally able to escape from the stranglehold of private financiers. Kudumbashree was also able to make its mark in agriculture, trade and small-scale industries and in the service sector. Nearly 1,400 members of the Kudumbashree NHGs became the winning candidates in elections to the local bodies, which followed shortly after, and now hold various positions in gram panchayats to district panchayats in the State.
Ulterior motive

This is the context in which the Congress’ Janasree Sustainable Development Mission was formally inaugurated on February 2 with plans to launch microfinance-linked NHGs of “all categories of people” – men, women and those above and below the poverty line – all over the State. The concern it has caused goes beyond political affiliations. “The fundamental principle of an SHG is that it should be coherent, with common interests, a common outlook and, even, common problems. Janasree groups are not coherent, offering membership to various categories of people. When a microfinance movement is sought to be launched by a political party, its scope for convergence, leverage and innovation becomes limited. It will be branded as an instrument of a particular party. In my view, it is a grave mistake. A political party is not the right forum to launch a microfinance initiative,” said T.K. Jose, Secretary, Local Administration Department, who as Director of Kudumbashree for seven years from its inception played a key role in shaping the movement under the government.

According to Local Administration Minister Paloli Mohammed Kutty, the Congress initiative will only lead to the destruction of a successful initiative under the State government that had the wholehearted support of both the LDF and the Congress-led United Democratic Front (UDF) in Kerala until now. Nobody has so far accused Kudumbashree of being politicised in any way. The UDF runs a sizable number of the local bodies in Kerala while the LDF is in power in a number of other panchayats and municipalities. Congress leaders should explain why they seek such a ruinous alternative when they have an equal opportunity to participate in the microfinance initiative under the State government itself, he said. “We can see it only as a political conspiracy. The Union Finance Minister’s statements at the Janasree inauguration is a clear instance of abuse of power. It is a move aimed at the next Parliament elections. Banks should not fall into this trap,” the Minister said.

He also said that if all political parties in India adopted the Congress model and came up with their own alternative programmes independent of such government initiatives, it would only create anarchy in the financial sector. “We should understand that a national party is embarking on such an initiative at a time when religious, caste and community-based political organisations too are tightening their grip on the microfinance sector. This would only lead to a proliferation of multiple membership and opportunity for the poor to take loans from several microcredit groups that would eventually prove unaffordable and entice them into debt traps,” he said.

According to Thomas Isaac, the idea behind floating such a parallel organisation is not just the destruction of Kudumbashree NHGs. “The Central government is thinking seriously of implementing poverty eradication programmes through NGOs, bypassing elected governments. Already, instead of such Central assistance reaching the State treasuries, money for specific poverty reduction programmes are routed through government-run societies, such as the Rural Health Mission. The next step is to bypass such government societies too and channel such assistance through NGOs. What the Congress has now initiated is a programme that would divert such assistance meant for Kerala’s development needs. A party that swears by the 71st Constitution Amendment is thus trying to create parallel structures to bypass even the local self-government institutions and divert assistance to NGOs. It is certainly a move in the wrong direction, a step backwards,” he said.

In the first week after the inauguration, at least, there was no response from the Congress leadership to these charges, except statements from some leaders, including Janasree chairman and former Congress Minister M.M. Hassan, that the new organisation is not a threat to Kudumbashree, as it sought membership from a wide strata of society and “not just poor women from Kerala society”. There were instead allegations that Congress leaders were already trying to scuttle Kudumbashree projects in the local bodies where they were in a majority and that a false campaign was on in some areas that Kudumbashree would be dismantled by the government at the end of its 10-year “term”, leaving the existing NHGs rudderless.

There was no answer forthcoming to the question of why a political party should launch a microfinance movement at all and try to scuttle a credible, non-partisan, secular, time-tested and highly successful government initiative. Unfortunately, these are signs of a grand political battle brewing in the world of microfinance institutions in Kerala, that was, until now, thankfully free of political interferences.