AVAG revolving fund

In an agreement between AVAG, BMZ (German Ministry for Economic Development and Cooperation) and VFAVR (Verein zur Förderung der Auroville Region; an initiative for the development of the Auroville region) the general objective of this fund was defined as: “Liberation of socially disadvantaged families in the Vanur block of Tamil Nadu from extreme poverty through an integral concept of supported economic activities, mutual cooperation and self-initiative of women in self-help groups”.

Overview

A revolving fund was created to meet the demand for microcredits for the purposes of businesses, agriculture, education, housing, social functions as well as to pay back the very high interest loans from the money lenders.

In January 2013, with the help of VFAVR , AVAG received a matching grant from the BMZ. The project ended in December 2014.

revolving funds body

At the completion of the BMZ project, ongoing lending based on the repayment from the SHGs has been successfully undertaken. AVAG-RF has successfully laid the foundation to achieve its long term goal: Financial sustainability of the project. AVAG-RF strives to maintain its financial sustainability despite the high inflation India is facing.

Context

  • By the end of 2012, banks in our region stopped giving loans to the SHGs saying that it would be resumed after rating the NGOs with whom the SHGs are associated.
  • Further inquiry showed that banks had to resort to this step due to non -performance of many loans that were previously lent to SHGs under various NGOs.
  • Particularly after the Tsunami of December 2004, many ‘temporary’ NGOs mushroomed in the area. Just to get more loans, women became members of several NGOs and many of them ultimately failed to repay their loans which were not properly monitored.
  • In short, the real spirit behind the SHG movement got eroded. To add to further deterioration, SHGs in Tamil Nadu were used by politicians for their own benefits.
  • Due to the combination of these factors, banks decided to shy away from the SHGs.
  • Though there was no issue of non-repayment of loans with the SHGs of AVAG, loans were stopped for our groups as well. We submitted all the relevant documents for rating us, but the lack of clarity on whether to issue further loans to SHGs and the change of bank managers in our service area caused much delay.

Loan Purposes

In the years 2013 and 2014, utilising the grants received from BMZ, a total of 1298 loans worth Rs. 32,548,000 have been disbursed by AVAG-RF and this proved to be in effect a great help for the women and SHGs since they could not get any other external loan support during this period. The top purposes for taking loans are housing and loan repayment followed by livelihood, social functions and education.

BMZ – AVAG-MF loans 01.01.2013 to 31.12.2014

Loans and purposes No. of loans Amount (Rs.)
Livelihood 263 5550000
Education 216 5072000
Function 191 5162000
Housing 286 8898000
Loan repayment 260 6301000
Medical expenses 67 1235000
Others 15 330000
Total 1298 32548000
bmz-avag-mf-loans

Impact

Through a baseline study and a final survey, the social impact of the project was measured. In conclusion, the BMZ project “Combat of poverty by microcredits to women self-help groups”, implemented by AVAG- RF, has been successful in many ways and almost all of the project targets have been achieved.

Women’s empowerment: The project has been successful. Women have become more empowered both with regard to property as well as decision making rights in their homes.
Income situation of families: Monthly income per person has increased, though it may not be so significant due to inflation.
A positive trend is that women tend to move away from daily labour towards business, employment and agriculture which are more promising, sustainable and secured.

Education: A good number of loans have been disbursed for education, exceeding the targeted amount by far. In due course, this shall lead to improvement of the household income since better educated children should have better possibilities and opportunities in the job market than their often illiterate mothers.

Health: An improvement is acknowledged. This is closely connected with the significant improvement in the housing and living conditions. Many women have improved their houses to more permanent buildings, but a great gap that remains to be filled is to help the women to build toilets in the households. Most of the women do not have a toilet at home and the majority of them have expressed their willingness to build one. Women seem to follow the health practices discussed during the seminars and trainings at AVAG in one way or another. Women grow vegetables and fruits at home and only a meagre number of women use chemical pesticides regularly.

Debt to money lenders: Though the project was not able to attain fully the target of getting rid of the expensive loans from money lenders, on an average high interest loan amount has been reduced considerably.

Financial sustainability: Due to the fact that AVAG-RF was able to quickly loan out the funds received from BMZ and that the expected income from interest on loans could cover the total expenses related to microfinance activities, it can be seen that AVAG-RF has achieved financial sustainability about six months after receiving the funds.
Moreover it became possible to build up a capital reserve and therefore increase the overall fund over the time span of the BMZ project. This project also helped strengthen the women’s federation due to increased trainings and meetings helping them to take responsibility in executing the project.

Highlights

  • From Jan 2013 – Dec 2014, AVAG has also formed 52 new self-help groups (SHG’s) and offered 173 counselling sessions to women and families in need.
  • The microfinance activities of AVAG have led to a yearly profit of Rs. 397.649 for 2013 and Rs.550, 550 for 2014. The total income from interest amounted to Rs. 2.212.452 for 2013 and Rs.2,611, 466 RS for 2014.

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