The dreams of most of our countrymen are shockingly modest. Azhar Pasha’s was to set up his own two-wheeler workshop in Bangalore for which he needed a loan of Rs 20,000. The dream seemed within his reach when he heard of the loan scheme for self-employment under the Swarna Jayanthi Shahari Rozgar Yojana (SJSRY). But now, two years after applying for it, nothing is left of his dream, which seems to have burst like a bubble and vanished into thin air.

His application was in perfect order with all necessary documents. He gave the Rs 2,000 asked for, just to obtain a quotation from the dealer providing the materials. He trudged to the bank till he almost wore down the path. But two years down the line, he has stopped chasing what he now feels was a mirage. Instead, he has borrowed money from private financiers at five per cent per month interest and started the workshop. Who knows, in addition to being a disappointed man, he may become a ruined man too, as he will most likely be unable to keep up these high interest payments and end up in a debt spiral.

The need to create employment in non-farm activities to absorb the huge mass of people rendered unemployed or under-employed in agricultural activities is pressing. These are the people like Pasha migrating in large numbers to cities and living in squatter settlements. The SJSRY is a credit and employment programme for urban poverty alleviation started in 1997. Convergence of services and community participation are its key tools.

Chandra Kala sharing her experience in self-employment and training for employers

The SJSRY has five components in Bangalore: Urban Self-Employment Programme (USEP), Development of Women & Children in Urban Areas (DWACUA), Thrift and Credit Societies (TCS) programme, a Training Component (TC) and a Community Structure Component (CSC). Under USEP, individuals devise an income generation plan for a maximum size of Rs 50,000. If selected, the plan will receive 80 per cent of the cost from an area bank as loan and a 15 per cent subsidy from the government. The other 5 per cent is the individual’s contribution. DWACUA is a programme for groups of women with a maximum size of Rs 250,000. Here the loan is up to 45 per cent (maximum) of the project cost and the subsidy is 50 per cent (maximum). The group contributes the other 5 per cent. The Thrift and Credit Societies programme brings together 10-20 women from Below Poverty Line families to carry out saving and lending activities. The government gives a grant of Rs 1,000 per member to be used as a revolving fund after the group has been functioning for one year.

The Training Component provides skill development with stipend in a variety of service and manufacturing trades, including local skills and crafts which will enable beneficiaries to take up jobs or self-employment. Registered training institutions like Industrial Training Institutes, polytechnics, etc., run by government, private or non-government organisations are utilised for this. The Community Structure Component provides a budget for working with other government agencies and departments to meet the needs of the community beyond those of incomes and jobs. For instance, SJSRY can collaborate with the Health Department to organise an immunisation programme for children or with the department of education to purchase furniture for schools.

In Karnataka, the SJSRY is implemented by the State Directorate of Municipal Administration. The other stakeholders are the urban local body (Bangalore Mahanagara Palike Area Project Office), banks, training institutions, and non-government organisations. The scheme is implemented through six Community Development Societies (CDS) each comprising a General Body consisting of neighbourhood groups and a Governing Council (GC). The GC includes project officers, community organisers, two NGOs, district-level bank manager, representatives of four convergence departments and five area municipal councillors. The CDS cover 411 Neighbourhood Committees and 3,937 Neighbourhood Groups. A total of 1,02,749 families have been identified as being Below Poverty Line (BPL).

But in the last three years, the total number of self-employment loans given under SJSRY has been just 952, which is less than one per cent of the BPL families. The rate of repayment of loans has also been dismal at 20 per cent, discouraging banks from lending to those identified. Training and community structure components of the programme also lack linkages to employers and jobs.

A case study was conducted in August 2002 on loans sanctioned between January 1999 and August 2002 by Janaagraha (a citizens’ movement) in association with ANKUR (Alliance for Networked Kinship with Underprivileged Residents), a partnership of several non-government organisations under the lead of Janaagraha. The study scrutinised the process of application, processing and repayment of loans; the flow of information between the four stakeholders – government, non-government organisations, banks and the urban poor; the extent of fulfilment of targets under SJSRY, the repayment of loans to bankers and the level of non-performing assets; the study was also to develop a framework for participatory action for effective implementation of the SJSRY scheme.

The key findings of the survey were summarised under the three categories: loan application and submission, loan processing and disbursal; and loan recovery and analysis. On loan application and submission, the survey found that almost 20 per cent of the recipients of loans under SJSRY admitted voluntarily that they were not from BPL families. Several others classified as BPL were unlikely to be BPL families as per quality of life indicators as they owned their own house, television, radio and tape recorder. Several loans shown as granted on the SJSRY list had actually been rejected by banks. Just seven borrowers said that they discussed the bank loan at a community level meeting. This implied a lack of community structures like Neighbourhood Groups and Neighbourhood Committees in identifying the beneficiaries. Most of the loans granted are due to the initiative of the project officers or community organisers, hinting at the absence of a transparent and open process of selection. Non-government organisations are still not involved enough in identifying beneficiaries.

“Another difficulty is that beneficiaries have to go to the single head-office of the SJSRY to submit all applications. There are no decentralised ward-level offices of SJSRY. The Community Organisers are not residents of the communities they serve and hence they spend more time commuting than working in their given area,” says Bhima, coordinator of SJSRY at Janaagraha.

For the Urban Self-Employment Programme, individuals are supposed to have training or skills in the vocations they intend to pursue. But training institutes do not automatically link the trainees with a bank loan. Banks too failed to link loan assessments made by them with training. Rather than non-government organisations, community organisers are burdened almost entirely with helping individuals identify projects and write a project plan. Training of the individual beneficiaries in project writing is also limited.

While banks claim the average time taken for processing an application is four months, the borrower puts it almost three times higher at ten months. Despite banks being members of the Community Development Societies (CDS), not even once was any bank involved in the decision-making of the CDS on the approval or monitoring of the loan. No banks were found to have attended the CDS meetings in September 2002. Three banks informed that they based their sanction for loan on the recommendations of the SJSRY staff. This could imply that a project officer’s approval automatically translates to a loan without a credit report being undertaken by the bank.

Though banks were clear that they gave a loan repayment schedule to the borrowers, some beneficiaries claimed that they received none. This called for greater interaction between banks, borrowers and community support groups to ensure that a repayment schedule is strictly adhered to by the borrower. Though banks claimed that they had not asked for sureties, some borrowers stated that they had. In one case, the signature of a beneficiary was found to have been taken on a blank sheet of paper. In two other cases, banks had not even inspected the borrowers’ premises to check if the lent money was being used for the intended purpose. However, in all the cases studied, the total amount sanctioned was the total amount received by the borrower.

As per numbers from the banks, the average amount repaid was 23 per cent of total funds borrowed but according to borrowers, the figure was 39 per cent. The average overdue amount per borrower is Rs 3,216 according to the banks, leading to reluctance on their part to lend. 67 per cent of the borrowers said that they had been able to generate higher profits in their business but this did not necessarily translate into better repayment of the principal and interest. Banks have highlighted that they are willing to lend for certain activities, such as tailoring for women and autos and STD booths for men, but the proportion of loans given for these activities accounts for only 25 per cent.

ANKUR is an innovative process of civil society participation to improve a government scheme. It was set up to launch a pilot project to catalyse SJSRY. ANKUR partners initially observed Community Development Societies (CDS) meetings to review the process flow of the loan application and compare the suggested procedure of the CDS with the existing procedure. Though CDS meetings are supposed to be held every month, the last meeting was held in March 2002. Even when meetings are called, often there is no quorum for more than an hour. The meetings were marked by the absence of all nominated members of the convergence departments like health, women and child development, industries, etc., and more importantly, by the absence of area councillors and bankers.

As the meetings were held during the day, only a few Neighbourhood Committee members could attend them, as they were largely daily wage earners and could not afford to lose a day’s wages. Though the general body is supposed to meet once in six months to approve the accounts of the CDS, neither the annual or six-monthly meeting of the general body had taken place between April and September 2002. Discussion on loans was restricted to discussing targets and not individual loans, their approval, rejection or otherwise. There was no discussion on repayments – on late payments or defaulters.

Discussion on skill training too was restricted to numbers and not on quality or outcomes of the training. Absent also was discussion on training for Neighbourhood Committees, Neighbourhood Groups, Thrift and Credit Societies (TCS) and Development of Women & Children in Urban Areas (DWACUA) groups and also on group dynamics, enterprise development, etc. Strangely, the bulk of spending has been for the community structure component for supply of furniture to schools and equipment for anganawadis. However, no approval of the CDS was taken for this spending, as in the case of other categories, with only announcements being made regarding these expenditures. The targets set for the formation of TCS and DWACUA groups have not been met by any of the CDSs.

In order to catalyse SJSRY, ANKUR first organised meetings with all the stakeholders – banks, government, non-government organisations and the urban poor. ANKUR partners decided to focus on three areas till March 2003 – improving beneficiary identification, bank linkages and training and capacity building.

To improve bank linkages, ANKUR partners decided to establish five nodal branches in every CDS to receive all applications approved by the CDS. The nodal branch managers would also be required to attend the monthly CDS governing council meetings where the loan application, sanction and recovery would be discussed. Banks were given a ‘turn-around time’ of one month within which they would have to approve or reject a loan application, giving clear reasons. Non-government organisations were asked to help beneficiaries to improve the quality of their loan applications and then to screen them. To simplify the applications, banks also adopted a standard format. Partner non-government organisations have also been asked to improve the current loan recovery rate of 20 per cent by various means, but especially through loan monitoring. It is expected that through improvement in loan quality and loan repayment, it would be possible to increase loan dispensation from around 250 per year to 1,500 by the end of March 2003. A Project Monitoring Committee (PMC) will be set up under ANKUR auspices to monitor the loans and review the progress of the scheme. The PMC will also facilitate monthly review meetings of all stakeholders for the purpose.

Under training and capacity building, ANKUR hopes to integrate ideas of neighbourhood groups, thrift and credit groups and self-help groups and achieve 450 vibrant self-help groups by March 2003. Banks are to be provided with ‘quality borrowers’ through improved selection process and entrepreneurial development programme/skill training programmes. ANKUR plans to empower the Project Team by conducting Management Capacity Building Workshops for them. It wants the team to have job charts defined through participative processes.

ANKUR feels that its intervention will benefit all the partners: for the poor, a larger and more scientific coverage of BPL families, the target being 3,00,000 self-help groups; a fundamental re-orientation of bankers with a target to provide Rs 20 crore for USEP and Rs 25 crore for self-help groups; for wage employment, a Branded SJSRY Employment Centre with linkages to large employers and markets. Lastly, integration and coordination with other departments such as the Slum Clearance Board, SC/ST Development Corporation, etc. ANKUR hopes that its intervention will serve as a model not only to cities in Karnataka but also the rest of India.