Impact of Microcredit Programmes on poverty Alleviation in Nepal A Case Study of Rupandehi District

Abstract

Loans from formal institutions to the disenfranchised and those without any financial security were always taken as an impossible idea. In light of this thinking, a new approach known as microcredit programme was developed thirty years ago. The term “microcredit,” which used to refer only to credit-focused programmes, has now gradually transformed to“microfinance,” a broader concept dealing with credit, savings, and insurance. And these services are provided by the formal microfinance institutions (MFIs) governed by certain act sand rules. Widespread context of rural poverty in the country, emergence of large numbers of MFIs,and the increased volume of loan investment are rationale of the study. Since the late seventies or after the Sixth Five Year Plan, (80/81), the poverty alleviation approach was integrated into the country’s mainstream financial system, recognising microfinance as an official poverty alleviation programme. The sector gained further momentum after restoration of democracy in 1991 with the establishment of Grameen Bikas Banks (GBBs) in the five development regions.Since that period, other different forms of MFIs have been set up. The Nepalese microfinancesector currently comprises a wide variety of models e.g., cooperatives, the private and thegovernment-owned GBBs/replications, government supported microfinance programmes, and authorised financial intermediary non-government organisations (FINGOs). Focus on women’s empowerment in the study is justified on the ground that the greater proportion of credit disbursed by various programmes is being offered to women. And women can be empowered only when they are benefited both with quantitative as well as qualitative change in their living standard along with improvement in the gender equity aspects like benefit sharing between female and male members of the household. Furthermore, mass poverty and its impact on valuable resources (mainly forest) on the one hand and the absence of sustainable policy implementation on the other are other major concerns of the study. While addressing this important issue, the study has shown the link between microfinance and forest resource management. 5 Though income is one indicator of socio-economic impact, it is much problematic tomeasure the income from small borrowers’ enterprises. Therefore, researcher has tried to assessthe result using beneficiaries’ expenditure pattern on food, clothing, health care, children’seducation, and their control over credit and income generating activities as important indicators.Women’s influences on important household decisions like family planning, marriage of theirdaughters, family cooperation, self-confidence, and savings mobilisation are used as empoweringtools. The increased benefits (change) in these aspects can fulfil the individual needs of thewomen reflecting their ability to benefit from programme participation. Change in householdenergy types and future plan by the programme participants and non-participants are otherindicators used to assess indirect impact on forest resource management/conservation. The quantitative and qualitative information presented in the study is based on a case studyof Solidarity Group Lending MF model (Grameen type), i.e. Nirdhan Utthan Bank Ltd. Threeprogramme-operated adjoining Village Development Committees (VDCs) in northern Rupndehidistrict (Devdaha, Kerbani, and Makarhar) were selected for field study purpose. The programmeparticipants and non-participants (all women) were interviewed by administering a set ofstructured questionnaire designed so as to compare the advantages of the programme. The impact analysis was done using “with” and “without” programme situation. The programme participants included 130 clients of NUBL of ages 20 to 45, all of whom were economically homogenous, and who had at least four years of participation in the credit programme. In the absence of baseline information, client respondents were asked to compare their pre-credit socio-economic conditions with that of the present using “before” versus “after”intervention method. The sample for non-client groups included new members of the same microfinance institution. For study purpose, non-clients were defined as new members (non-active members) of the NUBL who just submitted the loan proposals. Both client and non-client respondents were randomly selected for the interviews. Value of the indicators was also compared across the ethnic groups of people/indigenous nationalities using the same method. With clearly defined objectives and indicators, the result derived from the study show that average size of landholding among the credit groups increased by 20 percent in all 6 caste/ethnic groups. Previously, 48 percent of households owned various types of land (khet,bari) which increased to 69 percent after programme intervention. The average size of the landholding was also found to have increased from 0.107 hectares per household to 0.336 hectares resulting in the net increase of 0.229 hectare (a 214% change) after the 4/5 year period.But this size is very small compared with the average national and district (Rupandehi) figure swhich are 0.789 and 0.896 hectares respectively (CBS, 2004). The number of loan cycles or total amount of loan was found to have positive relationship with land accumulation. The clients who received more than Rs. 40,000 total loan,now own land. This implies that this amount helped the landless women to acquire land for themselves and build settlement. In the case of other household asset accumulation, the figures show that house, livestock, and household utensils increased by 13, 6 and 12 percent respectively. From the food sufficiency perspective, the programme intervention brought drastic change in household nourishment level. The overall percentage of food sufficient households increased from 48 to 93 percent making a net increase of 45 percent. By ethnicity of total households surveyed, 50 percent additional indigenous nationalities (Janajatis) and hard corepoor (Dalits) in the study area became food sufficient. Findings in response to social impacts indicate that more than 60 percent of respondent sreported an increased expenditure on housing, health care, and education irrespective of caste/ethnicity the highest being on housing (752%), a trait which strangely was displayed by only 4% of the clients, most of whom were Janajatis. The field observation also showed that the housing expenses of this small portion of population did not include the actual construction of the houses since they were using no outside labours in the construction process; the family members themselves built the homes. In addition, observation showed that housing expenses of the high caste groups remained unchanged. In the case of the schooling of the children, 86%respondents sent their children to schools. They were found to have access to more years of schooling for both female and male children equitably. However, caste/ethnicity has hindered the equitable increase in the access to livelihood assets. Regarding the findings in response to natural resource management, more than 20 percent 7 clients’ households had started using alternative energy sources like bio gas, improved stove, and kerosene instead of firewood for cooking purpose after joining the credit programme. They reported that they changed their energy types mainly because of time constraints owing to their microfinance-related businesses. Another reason given was that since their children, both sons and daughters were going to school, they did not have time to collect firewood from the forest.This indicates that clients are more conscious than the control group in using relatively health ierand time saving sources of household energy. This use of alternative sources of energy helps indirectly to reduce the dependency on forests for household energy. But overall findings of the study suggest that there are differences across groups of individuals. For example, the hard core poor did not change their use of firewood or grass/fodder at all and the high caste groups had the greatest percentage drop in the use of these resources. The results derived from the study suggest that microfinance has improved family’s well-being by increasing household’s food sufficiency level, asset accumulation, and children’s education. It has been credited with empowering women by increasing their self-confidence and decision-making power with influenced family status, family cooperation,households pending,and by increasing their social capital by joining some type of community-based or non-government organisations. Moreover, the access to credit not only gave woman opportunity to contribute to the family business but she could also deploy it to assist the husband’s business that increases her prestige and influence within the household. But it must not be thought that all loans are used for entrepreneurial activities.