“After the demise of my husband, I started head load fish vending utilizing credit with an exorbitant interest rate of 10 per cent per day. Now I am able to support and feed my family, now I am totally liberated from the high cost credit and have received 4 loans and have savings in my bank account. I am thankful to PTSLP for facilitating it.”Ms Nayagam (aged 47 years), Head load fish vendor, Koonankuppam, Thiruvallur district, Tamil Nadu, India.
Social and financial exclusion of women fish vendors is high. Through the design of an appropriate organization model – the Joint Liability Group (JLG) – and a sound credit product, the project mobilized 60,779 women into 3,854 JLGs and enabled them to access financial services.
Joint Liability Group (JLG) formation
There were stringent norms to be met by the groups and members underwent group training. An important feature of the initiative was the introduction of regular savings in JLGs with each member making compulsory savings.
While fish vending is a trading activity for which a cash credit mechanism would be more suitable, there were operational constraints in offering such a product. A term loan product, with easy instalments, was designed instead.
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The JLGs support:
- opening of individual savings accounts for each member in banks
- credit plans for individual members
- post-disbursement verification of utilization of loans
- field-level verification to check all voluntary savings
South Indian Federation of Fishermen Societies (SIFFS); KAVICA Federation; Thiruvallur District Fishermen Sangams Federation; Nagai District Fishermen Sangams Federation; and Kanyakumari District Fishermen Sangams Federation
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The IFAD-supported Post-Tsunami Sustainable Livelihoods Project for the Coastal Communities of Tamil Nadu (PTSLP) mobilized marginalized women fish vendors – who were not members of fisher marketing societies or self-help groups – into Joint Liability Groups (JLGs). This allowed them to access credit in the form of small loans and to become productive, profitable entrepreneurs. The project has mobilized 60,779 women into 3,854 JLGs and given them access to financial services.
In India, in the coastal communities of Tamil Nadu, fish marketing is an important part of life. Fish processing and selling is particularly significant as a source of income for women. However, social and financial exclusion of women fish vendors is common. As a result, the PTSLP has faced challenges in that benefits associated with the fish marketing societies which have been established - allowing members to take out small loans - tended to be skewed towards men. Further, because of their long, anti-social working hours, many women are not part of self-help groups either.
Critical issues that have affected women’s livelihoods are high rates of interest on credit and the dwindling availability of fish due to competition from traders and export houses. Women have had to participate at auctions of fish catch but – because of their financial exclusion – have been unable to compete with large-scale traders and export agents with greater access to credit and capital.
To be able to buy fish even in small quantities, women need ready cash. Without access to loans, they had to borrow from traders who offered credit at prohibitive rates of interest. Furthermore, the credit was frequently linked to unfavourable terms of trade and used to establish exploitative relationships.
The PTSLP studied various models of mobilization for women fish vendors and decided on JLGs. These are small groups of a minimum of five or six women who come together in order to access individual small loans. The loans are offered without collateral, but against a mutual guarantee. This means that if one of the fish vendors fails to repay, the loan is guaranteed by the amount mobilized by the group.
JLGs are organized in district-level federations coordinated by the South Indian Federation of Fishermen Societies (SIFFS). With the assistance of their district federation, the JLGs prepare credit plans for their individual members, as well as aggregate federation-level plans. After verifying individual members’ credentials, the district federation sanctions and distributes the credit to members through the JLGs.
Borrowers are initially provided with relatively small and short-term loans; once they demonstrate a reliable repayment record, they become eligible for larger loans and other loan instruments. All JLG members are required to open an individual basic savings account. After a given period, these savings are taken as collateral, to guarantee second and subsequent loans to beneficiaries.
In the JLG scheme promoted by the PTSLP, small loans of INR 15,000 (about US$240) are provided to each member, at an interest rate of 12 per cent, repayable in 24 months. Once the first loan is repaid, loans of INR 20,000 to INR 25,000 are provided by the federations in the second and subsequent cycles, based on needs of members. Federations use a revolving fund and also facilitate loans from banks under business facilitator arrangements.
A credit life insurance product is an additional innovation. Insurance companies only offer cover to women under 55 years of age, but about 15 per cent of the fish vendors are above that age. The boards of the federations therefore decided to extend insurance cover to older women. Part of the loan amount is reserved and collected to generate a separate savings account for insurance purposes, for instance in case of the death of a JLG member.
Initially 3,000 women were to be mobilized into JLGs, but the federations have formed additional groups, using the interest earned and the repayments from the revolving fund. In all, 3,854 fish vendors have been mobilized into 682 JLGs.
Women have saved a total of INR 13 million (about US$180,000) averaging INR 3,990 (US$56) per person. Loan repayments have been on time with 100 per cent recovery. Many women have paid their loans off early in order to access larger loans in the next cycle.
During the second half of 2019, the federations started mobilizing savings at federation level, as member margin money. Federations use the savings for lending to the fish vendors.
With respect to the life insurance product, many women have been supported to deal with difficult situations. For example, in Kanya Kumari district, INR 457,980 (US$6,500) has been collected, INR 173,916 (US$2,400) has been paid in insurance premiums and INR 11,000 (US$155) has been paid out for funeral expenses following the deaths of 11 members. The balance is INR 273,064 (US$ 3,800).
Women were also provided with ice boxes, weighing scales and other equipment worth INR 5,000 (US$70), with 20 per cent of the cost coming from beneficiary contribution and the rest from project funds.
In summary, women were empowered through access to financial services and timely and adequate loans. The application of the JLG scheme has also enabled several groups of women to access credit and open their own companies. Strong repayment records indicate the women’s potential to become self-sufficient and expand their businesses.
Lessons Learned/Potential for replication
The intervention meets an essential need of the fish vending women: credit at a reasonable rate of interest. The features have been carefully designed considering the members’ needs and convenience. Doorstep delivery of financial services has ensured that the women’s interest in JLGs has continued. Transparent financial dealings have increased women’s trust in the system. As a result, in addition to the mandatory savings, they have saved additional amounts voluntarily.
Rigorous training on group dynamics has ensured that discipline has been observed. Attendance rates at group meetings are high. Savings regularity has been high. On-time repayment rates are 100 per cent.
The project management unit played an important role in the design of the intervention, and in quality checks during the initial phase of implementation. Choosing the right partners – well-established fisher federations – was a critical success factor.
In order to convince mainstream institutions to work with marginalized sections of the community, demonstrated models of inclusion are required. The creation of a revolving fund for the federations to provide the first loan to the women was a critical design element.
Through their 100 per cent on-time repayment of loans, the women have demonstrated their bankability. Public sector banks are now partnering with the federations and willing to provide subsequent loans.
Furthermore, the project sees an opportunity to work on the dried fish value chain because almost 70 per cent of the fish vendors are taking up dried fish processing and marketing. The federations are considering setting up producer companies that will market both fresh and dried fish. Women are expected to become key stakeholders in the producer companies and two of the federations are also considering offering governance positions to women.
Last update: 22/07/2020