Late last year I was researching at Mumbai’s extensive Dharavi slum – investigating residents’ management of irregular and unpredictable incomes as part of a global study co-ordinated by Niti Bhan of the Helsinki School of Economics. Some of my field observations and musings were posted on our research blog but as it has now been closed I thought I’d feature one of them here – relating to the merits of local micro-savings schemes.
Prema Salgaonkar (above) has been working with Mahila Milan for over 20 years and now heads a group of local facilitators of a daily savings scheme for Dharavi residents. Mahila Milan means “women together” and provides a vehicle for the empowerment of women via leadership roles and advocacy alongside its pivotal daily savings collection. Prema visits around 450 households each day, of which a third will deposit anything between Rs 5 to 200, with almost all households banking something each week. Such an initiative is ideally suited to the irregular nature of earnings at the base of the pyramid which we have been widely discussing during our research.
The deposits from a number of collectives are formally banked but rather than paying interest Mahila Milan provides community and emergency support in a transparent manner. For many, without this daily visit which both incentivises and protects savings, surplus cash would not even be conceived of – let alone put aside. Savings are readily accessible and members of the scheme can apply for credit if required – though this takes a distant back seat to focus on savings. When loans are requested the local Mahila Milan leaders will assess the need and ability to repay, possibly consulting with neighbours as to the borrower’s situation. Repayment terms are negotiated on a case-by-case basis around the borrower’s earning patterns, with consideration given to the maintenance of some savings alongside repayments. Loans –usually for up to Rs 500 at 2% interest – have helped with school fees, medical bills, home improvements and entrepreneurial start-ups from tailoring services to coconut vending.
Beginning in Mumbai in the eighties, initially Mahila Milan had many more illiterate members and developed a system whereby coloured squares of paper would be exchanged for deposits and kept by the saving member in a plastic bag: red for one rupee, yellow for two, green for five and so on. This way members could always check how much money they had access to and plan accordingly. Now this system has been largely disbanded and replaced with passbooks which members were proud to show us and explain the context of various peaks in savings and withdrawal. Currently Mahila Milan constitutes a networked federation of nationwide woman’s collectives encompassing 60, 000 women.
The system is not just about collecting money but also about daily contact which deepens the understanding of various issues facing Dharavi residents. Contributing to a consensus of community priorities, this information is often passed on to other support groups in the area such as the local community council (panchayat) plus used to inform a number of Mahila Milan initiatives. One of our informants (above) who used the scheme conveyed that even on the days when she has nothing to deposit that its was reassuring to be visited by a trusted outsider with sound financial knowledge and that she sometimes used the opportunity to discuss issues such as how rising food prices were affecting those beyond her own neighbourhood. She notes that watching her savings grow has allowed her to start imagining and planning a better future for her family – with her mother and sister also active members in the scheme.
We were told of numerous success stories like the woman who saved towards buying a second-hand sewing machine which allowed her daughter to leave a gruelling job at a local garment factory to start her own now-flourishing dressmaking business. Another woman with six children and an alcoholic husband saved Rs 5-10 a day till she had Rs 5000 with which she bought a machine to process heavy duty plastic for recycling and now boasts a much higher standard of living for herself and her family. Others access their savings on a short term basis to counter income fluctuations – still signalling a heightened life standard. And significantly most continue with their savings schemes while servicing their loans.
Micro-credit has been commanding a fair amount of attention surrounding poverty alleviation of late – including voices of caution as have featured in our research discussion. Mahila Milan seeks to strengthen financial assets primarily through savings-led services with micro-loans being offered as a secondary and complimentary service. Last year’s brief article Putting the Microsavings in Microfinance from the New York Times makes the highly relevant point that “only some poor people will benefit from the chance to borrow, but almost all will benefit from the chance to save.”