About the Samhita Microfinance initiative
The Samhita Microfinance initiative was started in Rewa district of Madhya Pradesh in India in January 2008, as a part of a broader effort of the Samhita Community Development Services network. The network, founded by Praseeda Kunam and her husband, aims to apply collective, coordinated action in developing a network of sustainable and scalable community initiatives that deliver positive economic, health, educational and environmental impact to disadvantaged communities.
The Microfinance Institution (MFI) grew to serve four poorest states in Central and North India (Madhya Pradesh, Uttar Pradesh, Chhattisgarh and Bihar) with 90 branches spread across 37 districts. Until now it has disbursed around $200 million (1,532 crores) in loans to over 102 thousand women to support their economic activities.
Helping women of poor households
The Initiative focuses purely on providing financial loans and literacy program to women, both from rural and urban areas with limited livelihood opportunities: landless, primarily agriculture wage labourers or migrants from rural areas living in urban slums.
According to World Bank microcredit programs are effective in helping women become self-employed and increase their income. Also gender inequality tends to decrease with poverty reduction. Children of microfinance female borrowers are more likely to benefit from full-time school enrolment as income generated from micro-enterprises are often invested primarily in children’s education, particularly benefiting girls. But there is also a business rationale behind: women register higher repayment rates than men.
Source: Samhita Community Development Services (2020). Samhita Overview. February 2020. Presentation.
Loans are given to women forming self-support groups, in which women vouch for each other, and, therefore, make sure that members of the group follow up on loans repayment. Loans can be only used for the purpose of economic activities (as well as education). Women lend small amounts of Rs1000 ($13) to Rs12 000 ($138) with weekly or biweekly repayments for a period of 1, 1.5 or 2 years. And 80% of women continue with further loans after repayment as their economic activity expands.
Microfinance and women financial literacy
Microfinance and financial education complement each other as microfinance institutions offer the poor new products increasing their financial literacy, and at the same time financial education helps the poor to manage financial resources better and understand their financial options.
The Samhita Microfinance Initiative introduced a financial literacy training as core component of financial delivery services. What it means in practice, is that each female borrower has to undergo 4-day financial literacy training on money management, debt management, savings, insurance and pension before being eligible for a loan.
The training takes places in office locations (see image above) and concepts are explained through stories and interactive exercises.
Where is the opportunity for technology?
Loans are collected personally by MFI employees during weekly gatherings at the office location. The reason for it is twofold: access to internet is limited to access via mobile and very often the poor do not have enough money to pay for the internet subscription, and mobile payments are simply too expensive for the poorest to incur their costs. That also concerns employees of the MFI that do not have a direct access to laptop or internet at home.
Only branches have access to internet and to technology platform where the info about each borrower is recorded. The platform enables also analytics across branches and borrowers' data.
Is there a wider scope for technology and fintech solutions to enhance the delivery of microfinance services and as well as financial literacy programs? How other MFI in the world dealt with the same challenge of insufficient connectivity? That I will explore during my consulting assignment with the Samhita Community Development Services network.