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Arthacharya Foundation is a national NGO engaged in poverty aliviation, of the poorest of the poor. According to the Sri Lanka Central Bank statistics, 24% of the population fall below the poverty level and is scapulae from the main stream economics due to many factors such as special, cultural, historical and economics.
Arthacharya Foundation is not involved in charity and community development. What the organization is basically involved in a program when the poorest of the poor are brought to the main stream economics by, |
• Identifying the poorest of the poor
• Positive isolation from the main stream
• Facilitating them to build their own community groups in which the leaders within the group
• Provide access to credit at market rates
• Monitor and evaluate their programs |
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Our Micro-finance Programme Process
Seven Steps to Take Target Group Poor Households Out of Poverty :
A new approach of social mobilization
The women's empowerment through poverty alleviation strategy that is developed and refined by the Arthacharya Foundation, has already allowed a large number of those below the poverty line, particularly poor women and female headed households to significantly improve their living standards and get out of the poverty trap. It takes into account the basic belief within the organization that in an open market economy based on a withdrawing role of the government, there is a critical need to change the former conflict approach of social mobilization into a harmony model that allows the poor and particularly the women to understand the realities of the open market economy as well as to shape themselves to become part of it, in order to reap benefits. Vulnerable sections of the community such as the female headed households have to be protected through a safety net in the short term. But by taxing growth and making the poor even more dependent, the governmental safety net of mainly food subsidies actuall yworsensthe situation of the poor and women headed households in the long term. It is at this crucial point where social mobilization as designed by the Arthacharya Foundation takes over the function of alleviating poverty through increased productivity and incomes and satisfaction of their practical and special needs in seven steps.
Generally, the strategy is characterized by a central process which provides the backbone of the poverty alleviation strategy and is ultimately aimed at income generation through the initiation of microfinance (savings and credit) activities and carefully selected micro-enterprises. A summary of the strategy is depicted graphically in Figure 01. |
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| Step 1 : Identification of poor households and targeting |
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The starting point of the strategy will be the identification and the targeting of the poorest of the poor who account for 23% of the population. The criteria used by Arthacharya for this purpose is the poverty line of the country which currently stands at Rs. 860 per head per month. This poverty line is determined by the cost of basic nutritional requirements of an individual. The average family size of the country being 4.6 any family in the country would require almost Rs. 4,000 for its bare survival. The households whose monthly income is below the poverty line are the one which are being targeted at by the Arthacharya's poverty alleviation programme. |
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Identification of the poor using the criteria is carried out by the facilitators and project managers of the organisation. It is participatory methods such as Wealth Ranking and Cashpor method that the project team use to identify the poorer groups. Identification activity is further continued to the project implementation period since it enable the project to cover more deserving households which were missed by initial activities…
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| Step 2 : Social mobilization : analysis, awareness and conscientization |
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The next phase which is essential for the entire project and future activities to be developed, will be Social Mobilization. The identified poor households will be called for a public meeting, in which, first, a general analysis of the local socio-economic reality is made. Guided by the facilitators the beneficiaries will analyse the socio-economic, political, historical and other factors which have contributed for their present situation. Subsequently, possible solutions will be found within the group, and the facilitator will explain the objectives of the project, as well as how the poor could benefit from it through their active participation. |
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Sensitizing members of the community on gender relation will be the key element to build up the necessary social backdrop for this purpose. The members of small groups with a small percentage of men will be sensitized through training on gender relations conducted over two days.
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| Step 3 : Institution building (small groups formation and intra group activities) |
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Next, the targeted poor are guided to form small groups consisting of around five to seven members. In these groups the members will be encouraged to further analyze the socioeconomic factors, and plan out possible solutions. It is shown to the group members that capital formation is vital and financial discipline is critically important, and the facilitator guides them to start with a collective savings programme which will be treated as the central activity at this point. However, the facilitator will also introduce counselling, preventive health care, nutrition, child care and sanitation during the interactions with members. |
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“Compulsory” savings of an agreed amount are now made by the members on a weekly basis, with the treasurer of the group keeping the money and records. With the accumulation of savings the group will grow the capacity to lend money to its members, which has already led up to the setting up of an internal credit system, with the group selecting the credit worthy based on their own criteria. The office bearers of the small group rotate, generating important administrative capacity in each member, while the credit recipients pay their loans with an interest determined by the group. It can already be noticed that gradually a savings and credit culture is taking root, although this aspects will need further strengthening.
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| Table 3 Targeted Group Savings and Accumulation per Month |
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| Month |
No of Groups Formed* |
No of Members |
Amount Saved Rs. |
Cumulative Savings Rs. |
| 1 |
12 |
72 |
40 |
2,880 |
| 2 |
24 |
144 |
40 |
8,640 |
| 3 |
36 |
216 |
40 |
17,280 |
| 4 |
48 |
288 |
40 |
28,800 |
| 5 |
60 |
360 |
40 |
43,200 |
| 6 |
72 |
432 |
40 |
60,480 |
| 7 |
84 |
504 |
40 |
80,640 |
| 8 |
84 |
504 |
40 |
103,680 |
| 9 |
84 |
504 |
40 |
126,720 |
| 10 |
84 |
504 |
40 |
149,760 |
| 11 |
84 |
504 |
40 |
172,800 |
| 12 |
84 |
504 |
40 |
195,840 |
| 13 |
84 |
504 |
40 |
218,880 |
| 14 |
84 |
504 |
40 |
241,920 |
| 15 |
84 |
504 |
40 |
264,960 |
| 16 |
84 |
504 |
40 |
288,000 |
| 17 |
84 |
504 |
40 |
311,040 |
| 18 |
84 |
504 |
40 |
334,080 |
| 19 |
84 |
504 |
40 |
357,120 |
| 20 |
84 |
504 |
40 |
380,160 |
| 21 |
84 |
504 |
40 |
403,200 |
| 22 |
84 |
504 |
40 |
426,240 |
| 23 |
84 |
504 |
40 |
449,280 |
| 24 |
84 |
504 |
40 |
472,320 |
| * One HRD will form an average of 3 groups per month |
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the end of the first month will be Rs. 3,600. And by the seventh month it will be Rs. 80, 640, while the targeted amount of savings at the end of the 24 th month will be Rs. 472,320.
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| Step 4 : Institution building (CBO formation : inter group and collective activities) |
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The smalls groups (also called self help groups) in the project community and/or area will be motivated to interact with each other, and learn from other experiences in dealing with small loans. It is at this point that the official Community Based Organization (CBO) which represents all the small groups in the Division is created, providing an important stimulus for the project. CBO formation and further increasing the capacity will be one of the major components of the project. Members of the Boards of Directors and Office Bearers will be trained during the second and third years of the project in increasing institutional capacity. |
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Arthacharya will use institutional development tools that it has developed over a period of time to develop its own framework to build and measure the institutional capacity of CBOs. During the second year CBOs will be made legal entities through their registration with relevant authorities. Also, following the establishment all the project CBOs will be brought under the CBO network of the Arthacharya Foundation so that the project CBOs could share experiences, best practices and resources with them. Another activity to be introduced will be building linkages between the project CBOs and various other stakeholders identified by the CBOs and project team such as banks, health services, DS office, other government departments in the area, other NGO and government projects in the area and donor agencies will be linked to the CBOs. With the development of the microfinance programme CBOs will identify and appoint a paid full time manager fro m among the beneficiaries.
Practical gender needs satisfaction activities will continue. In addition to the counselling activities regular training will be conducted on health, nutrition and solid waste management.
Similarly, children of these women also will be made aware of their realities and organized under children's groups. The children's groups also will have savings activities in order to cultivate the savings habit and discipline among the children from an early age. In order for them to save money the children will be guided to generate incomes through activities such as collection of solid waste for sale and compost making out of organic waste. This activity will further lead them to grow home gardens which will involve them in productive work to generate incomes independently. The purpose of these activities will not only be income generation but also will cultivate self discipline and increase their capacity as well as self confidence.
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| Step 5 : Identification of feasible projects and training |
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The microfinance practices promoted by small groups and CBO s through savings and internal credit and the financial discipline cultivated as a result will eventually lead the target groups to realize the fact that they could increase their incomes considerably if they could have access to external credit for the further development of their micro enterprises which they are already engaged in. A reality which the Arthacharya Foundation has learned through experience is that the poorest of the poor are not unemployed. On the contrary, they have undertaken more than one activity to generate incomes. The activities range from string hopper cooking to hair cutting, vegetable gardening to soft toy making and animal raising to small scale trading.
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When the target group are convinced of their potential to develop these enterprises and increase incomes the project team will train them on how to study the feasibility of such projects. Further the beneficiaries will be trained in credit management and procedure.
Practical gender needs satisfaction activities will continue. In addition to the counselling activities regular training will be conducted on health, nutrition and solid waste management.
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| Step 6 : Micro credit extension and micro enterprise development |
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Upon development of their loan proposals, training is provided to carry out feasibility studies of the potential projects, thus allowing the target women, in coordination with the HRD, to assess whether there is a market for their product or service, what prices should be charged and where inputs can be obtained at the lowest cost, etc.
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Further training under this project will be given on credit management and the correct and transparent use of the external credit provided by the donor organization, highlighting the concept of a revolving credit fund, and agricultural production techniques. Together with its beneficiaries and staff Arthacharya has developed a criteria for the selection of beneficiaries to receive credit. Each beneficiary and her loan will be treated as a project with inputs and outputs as well as costs and benefits. The lowly educated target women and men will in the process formalize their project operations and learn manage their small enterprises in a more professional manner. Channelled through the project structure of the Arthacharya Foundation, credit will be provided to both individual as well as collective projects of the target group. All the women involved are made aware of the fact that the investment made is part of the revolving fund that is beingestablished for the benefit of all the CBO members. With the credit recovered on the basis of interest, it will be reissued to cover the need for other projects, with the activities continuing in a cyclic manner, resulting in increased incomes. The first loan always will be less than Rs. 5,000 and the time frame of such loans will not exceed six months. Following the successful completion of it a beneficiary would be able apply for a higher amount. The maximum amount of credit they could receive from Arthacharya project is Rs. 40,000. Experience has established it when the beneficiaries have successfully gone through four or five credit cycles ranging between Rs. 3,000 and 40,000 she is well trained in formalities and procedures of banking.
One of the effectively established principles of the Arthacharya microfinance programme is to extend credit at the market rate in the country. At present the interest rate paid by women in ongoing projects is a minimum of 24% per annum ( 2.0% month). It should be mentioned that experience has convinced Arthacharya that what the poor would mind in relation to credit is not the interest rate but the adequacy and timeliness. In the case of interests, many of them pay rates between 10% and 20% per month (120% o 240% per annum) when they burrow from money lenders.
Practical gender needs satisfaction activities will continue. In addition to the counselling activities regular training will be conducted on health, nutrition and solid waste management.
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| Step 7 : Increased incomes and savings taking the poor out of poverty and to the mainstream of development |
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With the completion of each credit cycle the beneficiaries will increase their regular incomes and savings. When the beneficiaries make adequate profits they are encouraged to save with the mainstream banks - particularly with the investment savings account- as well. This will provide access to bank credit in less than two years time regardless of standard collateral required by banks. Besides, Arthacharya will introduce the successful beneficiaries to bank managers and if necessary the required guarantee will be provided. Arthacharya firmly believes that its role is confined to that of an intermediary to train and facilitate the poor below the poverty line to have access to mainstream resources given the vast network of such resources and the existing gap between the poor women and mainstream resources.
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Practical gender needs satisfaction activities will continue. In addition to the counselling activities regular training will be conducted on health, nutrition and solid waste management.
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