Financing community investments

FIELD NOTE 24697 May 1999 UNDP- 0 World Bank Water and Sanitation Program - rYN,'N South AsiaoLWLi )WH Paying For Change ser payment for services and infrastructure g -- relieves pressure on municipal financing and helps promote 'ownership'. It . can be a useful tool for j' , assessing demand when x sufficient information on type and levels of services are - available to the user, provided . t ' the prices are set A appropriately. These e- conditions are being increasingly met in Parivartan. The package of services provided under Parivartan is financed one-third by the community, one-third by the Ahmedabad Municipal - Corporation (AMC), and the rest by corporate sponsorship, charitable :> h/\ trusts, social welfore groups, _ multilateral or bilateral donors, or any other Updating the community accounts interested parties. cn  The Bank Eligibility criteria: Any adult SEWA Bank operates SEWA Bank is an urban woman who is recommended and a range of banking cooperative bank of and for self introduced by any current account services under employed women, which was holder of the SEWA Bank is eligible savings mobilization, established in Ahmedabad in to open an account. It is also savings mobilization, 1974. SEWA Bank operates a possible, in special cases, to open a individual account range of banking services under joint account with a male but operations, the Reserve Bank of India. What decision-making power always management of distinguishes it from other banks is remains with the woman. An payments for capital r that all of its 24,678 share- unbroken savings and credit history works, capacity- holders, 1,07,000 depositors, and is required (SEWA Bank helps works, cancial 1,39,678 clients are self employed women to build such a history over building for financial | women. As a result of this broad a period). Credit is not available to accounting, and community base, united with male joint account holders. shelter upgradation professional banking expertise, it Procedure: To open an account, loans on demand was ideally placed to offer financial the holder must give her intermediation to Parivartan. The photograph, her signature or her financial intermediation included right hand thumb impression, and savings mobilization, individual the signature of the current account account operations, full range of holder who recommends her. banking services, management of Generally, beneficiaries have to payments for capital works, come to the SEWA Bank to open an capacity-building for financial account, but SEWA Bank organizers *accounting, and can also visit an area if, say, a shelter upgradation loans on minimum of 50 accounts are to be demand. In late 1996, as a result opened at a time. For this, the Bank of their successful collaboration in coordinates with local NGOs, CBOs, Sanjay Nagar, the AMC and SEWA and SEWA's own network of Bank signed a unique Memorandum community leaders. of Understanding defining their 'Parivartan' accounts: Rs 100 is respective roles and responsibilities required to open an account. in the subsequent phases Beneficiaries who do not need credit of Parivartan. from SEWA Bank have to deposit Rs 2,100 within 60 days of opening The Memorandum an account. To continue the Scheme: The total contribution account, a minimum balance of per household is Rs 2,100 (Rs 2,000 Rs 100 must be maintained. is for basic services and Rs 100 The money that is deposited can for maintenance). The user can only be withdrawn for Parivartan. As either pay Rs 2,100 directly or take soon as a deposit is made, interest a loan to cover the amount and begins to accrue on the balance at pay back in installments. If a the rate of 5 per cent (the interest beneficiary wants the Bank's help rate may change as per Reserve for either option, she must open a Bank of India rules). savings account. Credit: A depositor is eligible for  Shree Mahila Sewa Sahakari Bank Ltd Statement of Slum Networking Project as on March 31, 1999 Area Total households Depositors Percentage Sanjaynagar na Chhapara, Saraspur 181 181 100 Pravinnagar-Guptanagar, Vasana 1,083 714 66 Sinheshwari, Meghaninagar 43 43 100 Hanuman Nagar CTM 294 263 89 Jayshakti Nagar, Sardarnagar 178 92 52 Ghanshyam Nagar, Amraiwadi 125 124 98 Sharif Khan Pathan ni Challi, Seipurbogha 105 100 95 Meldinagar, Naroda Road 98 98 100 Babu-lub-Labinagar, Behrumpura 105 54 51 Revaba Nagar Odhar-l 150 24 16 Patan Nagar-I & II 420 180 43 KK Vishwanath ni Chawl, Muni Nagar 460 217 47 Kailash Nagar, Ishonpur 113 39 35 Ashapurv Nagar, Amrarwadi 157 122 78 Total 3,512 2,251 64 % credit if she has a minimum balance may change as per Reserve Bank of of Rs 500 in her account. Loans are India rules). With a special Revolving available for shelter, infrastructure, Fund, the interest could be brought productive assets, or working down to expand the client base. capital. Where loans are given, the Repayment: Loans are repaid in loanee has to take the guarantee of minimum monthly instalments of another Ahmedabad resident who Rs 100 or as a lump sum. Interest is must provide an income certificate. calculated on the balance. The beneficiary has to become a Account holders who save and Account holders shareholder of SEWA Bank to draw repay loans regularly become w s credit. To do so, she has to pay honorable clients of the Bank. They lo ans re pay Rs 40 which covers membership move up from being a loanee to loans regularly fee, insurance and transactions being a leader, and some reach the become honorable charges, and purchase a Rs 100 Board of Directors. They are also clients of the Bank. share on which she receives an eligible for the Bank's other They move up from annual dividend. welfare schemes. These include A maximum amount of Rs 1,600 social security, health care, child being a loanee to will be given as credit for Parivartan. care, maternal protection and being a leader and For other purposes, the amount life insurance. The client also some reach the may vary. The annual interest on a receives marketing, accounting and Board of Directors loan is 17 per cent (the interest rate other services.  F? -t ~ - _ Such intermediation - . requires early. capacity building; , sustained .1 capitalization; and i small steps approach ; t K so that the ,,w - arrangements can evolve with changing ' , C demand The Road Ahead and infrastructure finance. The above arrangement has been Not every city would be so worked out with AMC and other fortunate as to have an participating NGOs. The procedure experienced, broadly based is reviewed after each cycle and is financing institution with the updated to suit changing needs. The capacity to provide extensive small- long-term goal of SEWA Bank is to scale banking services, as SEWA help build a range of sustainable Bank has done. Nonetheless, the community finance institutions to experience to date in Ahmedabad finance and manage community suggests some general lessons that infrastructure, basic services, and might promote the effectiveness of shelter upgradation activities. financial intermediations at the city So for, the strength of such level. Such intermediation requires financial intermediation has been early capacity building (especially of that it: partner community-based groups); * is community-based; sustained capitalization; and small * operates under an accepted steps approach so that the regulatory framework; - arrangements can evolve with the * is accessible to the urban poor; changing demand. and * has experience in urban shelter May 1999 For further information, please contact: Ahmedabad Municipal Corporation (Slum Networking Project) Sardar Patel Bhowan, Danapith, Ahmedabad 380 001, INDIA Tel: (91)-(0)79-5353 611; Fax: (91)-(0)79-5350 Email: mctiger@adl .vsnl.net.in UNDP-World Bank Water and Sanitation Program - South Asia 55 Lodi Estate, New Delhi 110 003, INDIA Tel: (91)-(0)11-469 0488/9; Fax: 462 8250 Email: wspsa@worldbank.org Designed and Produced by Media Workshop India Pvt Ltd.