SMILE

On Friday we visited SMILE (Semam Microfinance Investment Literacy and Empowerment Ltd), the largest JLG-model MFI in Southern India. It was established in 1999 as Mahasemam Trust to target poor women offering microfinance services including savings, loans, and insurance to promote poverty alleviation and sustainable development in the Southern Indian state of Tamil Nadu. It currently has over 175 thousand active borrowers and a total loan portfolio of USD 16.4 million with total assets of USD 20 million, making it a very profitable MFI.

My impression was that the expansion of their MF arm has overridden their other operations, which makes their objectives as an NGO and as an MFI not necessarily aligned. When talking to the loan officers and the office managers they were not very well informed on the larger workings of the organization; and could only tell us very precise things about the JLG groups.

After visiting the branch office for Chennai we went to see a sector meeting (a sector is made up of about 8 groups of 5 women each) in a slum in the outskirts of the city. The houses give out to a small alley where community life takes place, so there were children playing, clothes drying, hens walking around, dogs, people coming and going by bicycle and sometimes scooter, and a lot of trash and flies.

This is the space where the meeting takes place since there is no other space where 40 women can get together. They all stand in rows with their group, some have a group saree (the most organized ones -also one of their entreprenurial activities is making sarees) and they are all different ages, from very young (maybe 20) to very old. They looked very serious during the whole meeting, it was only at the end that we were talking to them that they loosened up and were laughing and smiling and very excited to tell us stuff about their lives. I always find it moving how we will all take up any chance to have an interested listener. I guess we are all lonesome deep down. More so people who are marginalised for some reason, in this case because of poverty and lack of education. It is likely that no one has ever been interested in their personal story, so it is strange and touching for them.

The meeting starts with the women lined up and the loan officer playing SMILE's anthem on his cell-phone and a pair of portable speakers (I wish I had a picture, very surreal). The women listen intently (or at least pretend to do so). The reason for this is that in many cases the women identify with their loan officer but not with the MFI. That is, when asked who gives them the loan they will say Mr. such-and-such, not SMILE. After the anthem they make a pledge saluting with their right arm over their chest saying they will be responsible and pay on time and be cooperative to their group.

Watching this I couldn't help thinking about one of the lectures we had in the course (What is wrong with microfinance? by Amy Mowl, an ex-MPA/ID) where she made the point of reminding us that JLG models in microfinance are a way of solving the numerous market imperfections in offering credit to poor households, but that it is a second best solution none of us would take if given the option. The women have to go to these weekly meetings and spend their time on them and be subject to extremely harch social sanctions if they are not abel to repay. Watching them take this oath and listen to the anthem seemed a bit demeaning. Also the fact that all employees of SMILE are men, and given cultural practices in India, particularly in rural and low income areas, this creates or perpetuates power relations between the MFI and the borrowers that go beyond financial transactions.

After this they sit down and they take attendance. Each group hands their weekly repayment to the section leader, who counts it and gives it to the loan officer. If any one member of the group is unable to repay that week someone in the group pays for them, but none of that is discussed in the meeting. So in fact there are lenders and borrowers within each group, that sort their issues internally without SMILE knowing. They only see their 98.7% repayment rate.

When talking to women they told us that most of them make sarees, others prepare batter for dosas, others make flower garlands. All of them sell their products within their small slum community. When asked why they don't scale up they said that they do not have a place to increase production, since they all rent their houses and apparently the landlord does not allow them to use it for business purposes.

On a larger scale I also think growing their business and selling to other communities would imply a big change in their lifestyle and the way they deal with their daily activities which goes beyond having the fixed or working capital to do so. These type of issues are supposed to be addressed through financial literacy and training programs offered by the NGO, but many of the women did not receive the training previous to taking the loan.

So it seems they are using their loan to smooth consumption and not really for income-generating activities. Which is not a bad thing, but it will definitely not get them or their families out of poverty. They also did not seem to have a plan on a time to stop borrowing, they would stay in the group "as long as they would have them".

It had been such a long time since I had gone to the field and interacted with people in the beginning I was overwhelmed, but I really enjoyed it; talking to them and seeing them interact with each other, as well as the children who want to shake your hand and be in the picture. But mostly starting to understand how MFIs work and what joint liability groups look like.