Catalog

Reshaping Our Daughters' Future: Microcredit Project in Nepal

By Rollie del Rosario, Senior Multimedia Coordinator

Nirmala Chaudhari begins her day at 2:30 a.m. By the flicker of a gas lamp and earthen stove, she prepares a light snack from the previous night's leftovers for her younger children and brews tea for the whole family. After cleaning the kitchen and attending to a few other household chores, she treks to the paddy field in the morning mist, carrying the farming implements dictated by the season. However, since last year, another task has been added to her morning ritual before farm work: feeding and milking the buffalo.

Although the buffalo has added at least another half hour to her 12-hour workday, Nirmala does not mind the added chore. Purchased through a loan of Nepali rupee (NRs)15,000 (approximately US$250) from the Ghorahi branch of Nepal Bank Limited, one of the banks participating in the ADB-financed Microcredit Project for Women, the buffalo is Nirmala's new pride and joy. With milk selling at NRs10 (US$0.16) for a half liter, she makes an average of NRs70 (about $1.16) a day during the 14-odd months that the buffalo produces milk. Female calves are valuable since they can be used to breed and provide more milk, while males can be sold straight away or raised for plowing. Even the dung is used for fuel as well as for plastering exterior walls.

Nirmala has another reason to be happy. With an emergency personal loan from Samai Sewa Bhaisi Palan Samuda (Social Service Buffalo Raising Group)‹the all-female savings and credit group that guaranteed her loan for the buffalo‹ she was able to repay her debt of NRs10,000 (approximately US$166.66) to a village loan shark. Settling this debt released her son from kamaiya (bonded service for debt).

"Our son Chandra Prasad was a kamaiya. We had borrowed NRs2,000 (about US$33.33) from them. We sent our third son to work for the money. He was 15 years old. Later, my son did not want to continue. He complained about being ill treated. He complained about being asked to work on very difficult chores. He complained of not being fed well. We asked him to continue but he did not agree. The next year when he was to continue as kamaiya, they came for him but he just fled to India in anger."

"We had borrowed NRs2,000 (about US$33.33) but later the loan amounted to NRs10,000 (approximately US$166.66). Then we borrowed from this group and paid back the moneylender. But my son is still in India."

Nirmala is a typical farmer housewife in Pakwuai, a small village in the Dang Valley, Western Nepal. Born a Tharu (one of the largest Nepali ethnic communities) 34 years ago, she is the mother of 12 children. Her family lives on public land and has very few possessions. With no steady job and no real property, she and her neighbors cultivate a small paddy field and share its produce with the landlord. Like most of her neighbors, she can only write her name and copy a few letters of the Nepali alphabet.

Dharma Kumari Gurung did not have much going for her a little more than a year ago. Now a single mother, she had given her small plot of land for her two sons' dowries a few years earlier. With very few and simple needs, she managed, at the age of 54, by doing household chores for her sisters-in-law with whom she lived. She also had a goat whose milk she sold to make ends meet.

While collecting fodder for the goat, she fell from a tree and suffered an open fracture in her right leg which had already been fractured in a previous accident. The goat had to be sold to pay for the operation on her leg and the medicines. Already frail to begin with, she could no longer perform heavy manual labor.

Physically handicapped, possessing meager savings, and emotionally devastated, Dharma gathered her wits and resolved to overcome her crisis. She had heard about a loan program with which she might just be able to start anew. She moved to Pame, about an hour's drive from Pokhara, and joined one of the women's groups organized by the Women Development Division (WDD) of the Ministry of Local Development as part of the Microcredit Project for Women.

Even then, it was not easy for Dharma. Because she was still recovering from her leg injury, she could not attend all the training workshops which were part of the program. Her group members also harbored reservations about her disabilities.

"There was a time when others in the group had a very negative impression about my being a member of the group. There were doubts whether a physically impaired person like me could follow the rules of the program. I was badly ignored but Sita Madam (one of the motivators) came to my rescue, talked to the rest of the group‹then we all received the loan."

A year later Dharma earned an average of NRs1,200 (about US$20) a month from cooking and selling Dal Mot, snack-size packs of fried spiced chickpeas with a few grains of corn and peanuts thrown in. With a microcredit loan of NRs4,500 (about US$75), she bought a wood-fired stove, cooking utensils, and raw chickpeas. This has been her main source of income ever since.

"Selling chickpeas is very small money but still I save NRs300-500 (US$5.00 to US$8.33) a month. I have to pay back NRs1,100 every six months; for this amount I set aside NRs150 (US$2.50) from my monthly earnings."

"I have the courage to face the future.... I feel that I will have quite an amount by the time I pass away. I can take care of guests who visit me like my daughters and their children. I can feed them well. I cannot promise them wealth or property but I can keep them happy when they visit." She has had no trouble paying back the first four of six installments of the loan. In fact, she is seriously considering applying for a second loan once she has repaid her first. "I am the most regular in the group where paying back is concerned. I am very conscious about the fine that results if I am late to pay."

"From this experience, I have developed self-confidence. Let me pay back the remaining two installments. I will definitely apply for a second loan to produce bhujiya (a Nepali delicacy of spiced and salted flour noodles). This will net at least NRs800 to 1,000 (about US$13.33 to US$16.66) more a month."

The difficulties encountered by Nirmala and Dharma are typical of the sad state of rural women in Nepal. In a country where about 40 percent of the people live in absolute poverty, poor women constitute the most marginalized group. About 94 percent of the poor live in rural areas and 48 percent of these are women. More than 95 percent of economically active women are engaged in agricultural labor. Although they bear the brunt of farming as well as household chores, they have very little access to productive resources such as real property, cash savings, and credit. Women generally work harder and longer than men; plowing seems to be the only agricultural activity performed solely by men. With a female life expectancy of 52 years, Nepal is one of only three countries where women die earlier than men, who normally live to 55 or 56 years.

It was to address the plight of rural women in Nepal that the Microcredit Project for Women was launched in June 1993. The US$5 million soft loan is designed to raise the living standards of poor women by providing them easy access to credit and inculcating the values of group effort and cash savings.

The Project has three major components. The Group Formation and Training of Women Beneficiaries component provides support to the Women Development Division (WDD) of the Ministry of Local Development in the formation of self-help women's groups. Following a baseline survey of households in the 12 districts and five towns covered by the Project, Women Development Officers and volunteer motivators from participating nongovernment organizations (NGOs) started forming the groups. At the end of November 1997, 2,524 groups, each consisting of five to 15 members, have been formed.

Each group has to open a savings account in one of the banks participating in the Project. The members decide among themselves the amount of the monthly contribution per member, but the average is NRs25 (about US$0.41). Membership in a group entitles each member to make a loan from the participating bank without collateral. The group guarantees the loan of each member. However, only the groups whose monthly contributions are up to date can guarantee the individual loans of its members.

Aside from group formation, this component also provides for training the groups in the rudiments of savings, credit management, and bookkeeping as well as various income-generating and livelihood activities, and the operation of microenterprises and small business projects.

Because of the large number and extensive influence of NGOs in Nepal, the project has a separate component for the institutional support of selected NGOs. The management, accounting, technical, and capital-generating capabilities of participating NGOs are being strengthened with the aim of enabling them to function as credit agents of the participating banks. The partner NGOs are also empowered to form grassroots savings and credit groups. For example, Nirmala's buffalo-centered self-help group was organized by the NGO Gramin Mahila Bikash Sansta (Association for Rural Women's Development).

The most apparent project component, the provision of credit to women, makes funds available to beneficiaries who have been organized and trained by the WDD and partner NGOs into stable and functioning savings and credit self-help groups. The loans are channeled through two participating banks: the Nepal Bank Limited and the Rastriya Banjiya Bank.

Medium-term loans up to NRs30,000 (about US$500) are granted for agriculture-based, income-generating activities. Owners of microenterprises such as handicrafts, small restaurants, and convenience stores can benefit from loans up to NRs40,000 (about US$666.66). Operators of small businesses in urban areas can borrow NRs50,000-250,000 (about US$833-S$4,166). The loans have a repayment period of up to seven years. They are guaranteed by the security of the group's savings and/or group guarantees. The loans for small businesses are backed by adequate collateral.

As of mid-November 1997, 9,292 loans amounting to NRs114.7million (more than US$1.911 million) had been disbursed with an average repayment rate of 97 percent. Beneficiaries can apply for subsequent loans after full payment of their current account. Dr. Shambhu Dhungana, consultant team leader for the group formation and training component, explains, "We would like to cultivate the savings and credit habit. These women, the majority of whom used to borrow money at very onerous rates and under outrageous conditions, are now becoming aware that other sources of funds with comfortable rates and terms of settlement are available. From their own experiences, women who have no previous expertise in running small enterprises are learning that success builds upon success. Financially, the high repayment rate proves that the system is viable."

In practice, the three components are designed to work together to create a seamless environment to improve the economic and social well-being of underprivileged Nepali women. Beyond purely economic and financial considerations, the Project has contributed to a change in the collective awareness of women in very subtle and profound levels. Dr. Jyoti Tuladhar, consultant team leader for the NGO support component of the project elaborates: "It has promoted collective behavior among women. The group dynamics have been encouraged and promoted and women together feel a sense of power and feel a sense of togetherness and unity.

"They are getting trained, the awareness level is being increased, so I think this Project has done more than provide access to credit. It has taught women how to pull themselves together, how to move and ask and demand." Without the benefit of formal schooling, the words of Dharma echo Dr.Tuladhar's:

"I cannot do anything alone. I cannot ask for a loan alone that's why we had to get together and form a group.

"I was aware that the program was for women like us who have no social status and securities.

"A group certainly helped in creating awareness. For a person like me who has no land or any other property, how could I have made it alone?"

In the village of Mangalpur, Chitwan district, 36-year old Rama Neupane weeds her cauliflower and radish plants shoulder-to-shoulder with her husband Rukum. They are on their third crop for the year, having raised cabbage and tomatoes earlier. Last year, their gross income was NRs100,000 (approximately US$1,666.66).

Money does not come easy and quickly for Rama's family. Having migrated from Gulmi, a hill village northwest of Chitwan more than 12 years ago, she settled in Chitwan and married Rukum Prasad Neupane. Unable to read and write and barely comfortable with basic arithmetic, they used to borrow money at rates of 5 percent to 7percent per month from local money lenders. Now, with Rama on her second microcredit loan, their cash flow is a little more comfortable. With NRs 12,000 (about US$200) from the NRs30,000 loan (about US$500), she has leased a plot of land measuring 15 katha (about 75,000 sq. ft.) to augment the produce from her family plot's 8 katha (40,000 sq. ft.). The rest of the money is used to pay for seedlings, fertilizers, pesticides, and rental of a tractor. She only has to pay NRs1,100 (US$18.33) every three months, an effective interest rate of 14.6 percent per annum.

Although shy and modest, she is now considered by many as an elder didi (sister). All four of her children of school age are in the appropriate levels in the village primary and nursery schools. Some of her produce garnered prizes in the agricultural fair in Bharatpur last year. Friends and neighbors regularly come to her for tips and advice on the use of fertilizer and pesticides, rental of tractor, and marketing of produce.

Despite her relative success, Rama retains her simple and practical attitude about life. The biggest ambitions in her mind these days are how to get a better market price for her vegetables and buying a tractor. The idea of putting up a cooperative appeals to her, "If we had a cooperative, we might have a stronger voice in setting the prices. We will also have better access to fertilizers; these are always in short supply. And maybe, we can pool the money together to buy a tractor; right now, we have to pay NRs400 (about US$6.66) an hour to plow the fields. We need at least two plowing sessions of two hours each per crop.

She is grateful for the training and the knowledge that the Microcredit Project has provided her, "Before I did not know anything. Now I can train others. I can teach them how to grow vegetables, how to mix fertilizers and pesticides, how to look for profitable markets and how to apply for loans."

In Nepal there is a saying, "Chhoriko janma, hareko karma" (the moment you are born a daughter, your destiny is lost). Daughters to the hard life, Nirmala, Dharma, and Rama as well as more than 16,000 other women have taken a new grip on their own and their daughters' futures, a grip made steadier by the Microcredit Project for Women.