| Urban Banking | Rural Banking |

Poor people residing in villages, who make up the majority of India’s population, are mainly dependent on agriculture. They get only 2 to 3 months work in a year, either in their own fields or to work as agricultural labourers; during the rest of the year they look for some other source of income. It was very difficult for them to meet their day to day expenses and they continued to remain in the vicious circle of poverty from where they could just dream of savings besides earning for their survival.

SEWA started organizing women agricultural labourers in rural areas, in 1977. The organization has realized through experience that, if women have to progress on the path of development, they must be freed from the clutches of private moneylenders. For this they should be given facilities of credit. SEWA Bank has taken up this job for SEWA Union and SEWA Gram Vikas. This work was initiated by forming saving groups. In the meantime efforts were on to get license from Reserve Bank of India for carrying on this work through SEWA Bank. In July 1993 the efforts paid and SEWA Bank was permitted to operate banking activities in the rural districts of Gujarat. This activity is carried out through the formation and development of women’s savings groups, known as self-help groups. These groups, regularly meet, collect the saved amount from their members and deposit it in SEWA Bank. Financially stable groups are facilitated with credit options for their individual members. Eventually, a district level savings and credit federation of unregistered savings and credit groups (SCGs) is registered at the district level.

SEWA Bank provided banking services at the doorsteps of poor women, in order to pull them out of vicious circle and enable them to become self-sufficient. If a group of women get together and save money from their income to create a capital base, they can manage it efficiently and that would help them to come out of heavy debt or to get their land back by repaying the mortgaged amount. This helps them to reach an economically sound position. Although it is a slow and lengthy process, SEWA and SEWA Bank recognize this and show patience in helping women organize themselves into SCGs and giving them guidance and capacity building support at each step.

SEWA Bank’s Approach to Rural Banking - Promoting Capitalization

The idea of capitalization of women's local self-help groups towards self-reliance is a constitutive element of SEWA's overall strategy, which aims at the economic empowerment of poor, self-employed women and agricultural labourers. For increasing the economic and organisational strength of the self-help groups and association and for broadening SEWA movement, both, the members savings efforts and the external financial promotion, by the way of capital fund are necessary pre-conditions.

1. The district association organizers and Sewa Bank's promoters/trainers would visit villages and motivate rural women to form a savings and credit group.
2. When women decide to form a savings and credit group, they elect their own leaders (minimum two) and also give a name to the group.
3. The group then formulates their group’s rules and regulations as regards,
1. Membership.
2. Savings.
3. Loans.
4. Management and,
5. Linkages.
4. Women save regularly (normally monthly).
5. SEWA BANK provides trainings to the members of the groups leaders of the groups and organisors of the programme as regards operations, account-keeping, financial management , interest calculation and administration of the groups.
6. After one year, if the group is regular in savings and attending trainings, the group is eligible for borrowing from SEWA BANK. Loan is sanctioned in the name of the group, which is in proportion to its total savings.
7. Group decides as regards the loans to be granted to the individuals i.e. the purpose, amount, interest to be charged, repayment schedule etc.
8. Second loan is given to the group only when the first loan is repaid by all the members.

SEWA's approach in promoting these groups has been that the rural women should be the owners, users, and the managers of the group. Hence, SEWA Bank has consciously chosen to promote autonomous district level federations of SCGs, as opposed to opening branches of SEWA Bank in the rural areas – i.e. a demand led, de-centralised approach as opposed to a supply driven, centralised approach.

The Concept of Capitalization:

Capitalization is understood as the process of formation of capital towards sustainability and growth, at the level of the group as well as at the level of the individual household and the district association.

For this, at the level of the individual household, the members of the self- help groups contribute by regular savings, by taking and repaying loans at market rates in due time, by participating in the activities of the self-help group's meetings and in managing the group.

At the group level, the self-help effort of its members is supported by providing them with credit, training and other services, such as monitoring.

The Capital Fund as a Promotion Instrument:

This support is provided by the Capital Fund, which is legally owned by the group and which is the main financial promotion instrument for the economic strengthening of the group in order to make them sustainable. Capital Fund requirement is divided into two parts :

• Revolving fund (for loans) : 80%
• Development fund (for grants) : 20%

Purpose of Support:

Loans are provided to the members of the saving groups for :

• Releasing mortgaged land and other productive assets;
• For meeting working capital needs e.g. buying seeds, fertilizers, raw materials like bamboo and cloth, or for housing materials;
• For acquiring assets like sewing machine or hand-looms, or for buying sheep or land;
• For creating productive infrastructure like tube well, water supply, or vehicles for transporting finished products to the market.

Grants are provided for training, monitoring and other supporting services.

SEWA Bank is responsible for the technical assistance, monitoring and evaluation throughout the entire process. SEWA Gram Vikas will promote the building of sustainable district level associations and of the local women's self-help-groups. These associations in the course of time, will be able to take over functions which are related to planning and to technical assistance (decentralization).

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