A bank allies with the poor - against moneylenders

June 1st, 2008 - 2:30 pm ICT by admin  

By Jeevan Mathew Kurian
Malappuram, June 1 (IANS) A bank in Kerala has allied with the rural poor to free them from the grip of moneylenders, heralding a unique era in Indian banking. The ‘Snehagramam’ (Friendship Village) scheme of the South Malabar Gramin Bank, headquartered here, offers to pay back debts the rural poor owe to moneylenders.

The bank not only provides funds to clear the debts but also offers loans to start small ventures. The loan comes without any collateral.

“Studies conducted on farmer suicides prompted the bank to devise such a scheme. Many suicides were due to harassment byf private moneylenders,” T.S. Madhusoodanan Nair, the bank’s general manager, told IANS.

The scheme, which was started on an experimental basis in November 2007 in eight branches, is being implemented in all the 225 branches this financial year.

“Usually bank loans are big amounts. Rural people need only nominal sums but they need it fast. For this nominal amount they are hesitant to approach banks. Moneylenders know the pulse of a village and the villagers’ needs. The villagers get hassle-free loans from moneylenders,” says P. Aravindan, a senior manager in the bank.

The unique feature of Snehagramam is its rapport with the rural poor. The bank approaches the needy through the villagers.

Once an area is selected for implementing the scheme, a survey is conducted to identify those who have loans from moneylenders.

The survey is done with the help of panchayat members, farmers’ clubs associated with each of the bank branches and community development societies (CDS) of Kudumbashree Mission, a women’s self-help group promoted by the government. Under Kudumbashree, women’s neighbourhood groups also function as thrift societies.

“We got excellent cooperation from the people when we launched the scheme on a pilot basis last year,” said Aravindan.

The survey proved a great success. “It gave very accurate information because local people know well who all have taken loans from moneylenders.”

The assistance from the bank follows a scrutiny of the survey data by a panel of bank officials and representatives of organisations that took part in the survey.

Besides providing money to pay back loans taken from the moneylenders, the bank also gives aid to start new income generation activity.

“We have to make sure that they do not fall into the trap of moneylenders again. We give them such assistance based on their skills and background,” he says.

It was in the Chemancheri panchayat of Kozhikode district that the Snehagramam proved a roaring success.

“We distributed around Rs.11.1 million in 13 wards in the panchayat. Most of the finances went to the neighbourhood groups under the Kudumbashree mission. There were also individual beneficiaries,” said S. Satheeshan Valiyathan, manager of the bank’s Thiruvangoor branch.

“It is a big achievement that we could distribute such a large amount in a small area. The beneficiaries are poor people including fishermen. The loan was given without any collateral but there was not a single default in repayment,” says a Valiyathan.

Madusoodanan Nair concurs: “We paid around Rs.18.3 million to 2,168 people under the scheme in eight branches and the repayment was about 98-99 percent.”

While the bank provides term loans through neighbourhood groups, individuals get loans through bank account.

“For neighbourhood groups we even provided loans up to Rs.200,000. The bank fixes the loan for a group based on the savings mobilised by the thrift societies,” says Valiyathan.

For the loans availed of under Snehagramam, the repayment comes to around Rs.50 a month on a loan of Rs.10,000.

“In Chemancheri people cooperate well with the bank. They have a special affection towards the bank,” says Valiyathan.

The proof of the strong bond the bank has forged with the poor is displayed in the chairman’s chamber - a citation from a grateful Chemancheri panchayat for freeing it from the clutches of moneylenders.

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