UNDERSTANDING THE CLIENTS OF MICROFINANCE: A HOUSEHOLD LEVEL STUDY IN MANIPUR

UNDERSTANDING THE CLIENTS OF MICROFINANCE: A HOUSEHOLD LEVEL STUDY IN MANIPUR The centrality of clients lives and livelihoods to microfinance is one of FWWB s major research themes currently. We began our research efforts in this area with a series of studies among the clients of our partners in the north-eastern region. This is the first among those, dealing with Weaker Sections Development Society (Initiate), a microfinance organisation working mainly in the hill districts of Manipur. 1.0 Introduction WSDS initiate operates in more than 80 villages spread across the hilly district of Senapati. It became a partner of FWWB India in 2007 when the latter extended its activities in the North East as part of a new initiative that focuses on underserved regions. WSDS has a mandate to attend to the special economic issues that face the hills of Manipur through diverse activities related to NRM, microfinance and microenterprise development, community health and social security. The microfinance programme of WSDS currently operates in eight clusters - Motbung, Chandel, Koite, Moreh, IT Road, Konghom, Saikul and Tingkai in -- districts. As on 31 May 2008 it had 4500 women members, of whom 963 were active clients engaged in saving and internal lending. They were organsied into 30 SHGs (i.e., average membership 15). Most of the SHG groups were formed more than 5 years back as part of IFAD project wherein WSDS was an implementing partner. The groups were linked to microcredit for the first time with the help of FWWB support, which also provided the organsiation with exposure to the best practices of microfinance delivery. The first tranche of FWWB loan of Rs.25 lakh, disbursed in September 2007, was on-lent to 450 women. The second tranche of Rs. 22.5 lakh, released in March 2008, was lent to 513 women. The individual loan size varied between Rs.5000 and Rs.10000 with a repayment period of 12 months. 1.1 The Study In order to understand the socio economic characteristics of the microfinance clients and the peculiar dynamics of client households in the region where WSDS works, FWWB has decided to undertake a household level study covering a sample of its new clients. Such a study, it was thought, also would help us understand the nature and extent of credit need of the households and identify the gaps in credit availability. The base line data thus generated can be used at periodic intervals to systematically track the progression of clients too. The survey was undertaken in the district of Senapati two sub divisions Gamphazol and Saikul where the 450 clients supported by FWWB were located. It may be noted that Friends of Women s World Banking, India Page 1

Senapati, being a hilly district, has substantial tribal population (78.45 per cent of the tribal population as per Census 2001). It accounts for 16.57 per cent of the scheduled tribe population in the state. As per Census 2001the district has the highest proportion of agricultural workers ((as cultivators and agricultural labourers) in total working population 83.51 per cent 1. The sample households were drawn randomly from the client list provided by WSDS. The sample thus drawn had 43.1 per cent or 194 clients spread over 13 villages. 157 out of the 194 households lay within Gamphazol sub-division spread over 10 villages (Table 1). They are part of the cluster Motbung and the remaining 37 households form part of the Konghom cluster. As evident from Table 1, the number of households included in the survey constituted 30 per cent of all the households in the selected villages For the purpose of comparison we also collected information from 35 non-client households. Table 1: Distribution of Sample Households Number of sample HHs per block Village Gamphazol (Motbung cluster) Saikul (Konghom cluster) Total no. of sample HHs Makhan 33 127 Khenjang 21 30 Khokheng 20 32 N. Songlung 19 38 Kholep 15 74 Motbung 12 23 Gamgiphai 10 27 Pheijang 10 86 S.Buning 9 31 Leikot 8 50 T.Thangkan 10 54 Langkhong 21 Thangal Surung 6 157 37 572 1.2 Profile of Sample Households In terms of ethinic composition, Kuki tribe constitute 81.35 per cent of the sample households and Naga tribe, 15.54 per cent. All the clients, but one, follow Christianity as their religion. The average household size for the sample works out as 6. 1.2.1 Occupational Profile: Agriculture In all 166 out of the 194 households are involved in agriculture (Table 2). Majority of them (125 out of 166 or 75.3 per cent) cultivate paddy. About 11 per cent of these 1 The percentage of agricultural workers for the state of Manipur is 57.38 per cent. It may also be noted that the hill districts in general have more population depending on agriculture. Friends of Women s World Banking, India Page 2

families are in subsistence farming with respect to paddy, as they consume all the produce. Majority of households also cultivate vegetables (111 or 67 per cent of the sample) which they routinely sell in markets located in the valleys. Women almost exclusively serve as the link with such markets. The other major crops are colocasia, ginger, maize and rice bean (chak wai). Households that cultivate vegetables (111 in our sample) routinely sell them in markets located in the valleys. Women almost exclusively serve as the link with such markets. Apart from land in the hills allotted to them by the village head or council and generally cultivated under jhum 2, many households also own permanent agricultural land. Unlike the jhum lands, these have official patta attached to them. The sample households are found on an average to hold 2.01 acres of agricultural land. Of the 28 households (14.43 per cent of the total) that reported as having no permanent agricultural land, 54 per cent said that they are engaged in agriculture, six of them on lands leased in. Of those who reported having land, about 54 per cent turned out to be operating marginal and small land holdings with an average size of 1.31 acres (Table 3). These figures compare very well with the state level operational holding data published in 1995-96 (DES, 2004). Table 2: Major Crops and Number of Cultivating Households No. of households in agriculture 166 Crop No. of HHs % of HHs Paddy 125 75.30 Vegetables 111 66.87 Colocasia 76 45.78 Ginger 52 31.33 Maize 42 25.30 Chakwai (rice bean) 24 14.46 Banana 13 7.83 Table 3: Land holding Size of HHs that Earn from Agriculture Size of land holding Operational holding (in acre) Number of % of reporting reporting HHs HHs Average size of landholding (acre) Up to 1 acre (Marginal) 26 16.99 0.58 (0.56) 1 to 2 acre (Small) 58 37.91 1.37 (1.35) 2 Senapati, incidentally has the lowest percentage of geographical area under jhum (2.72 per cent). Tamanglong and Churachandpur have more than 6 per cent of their area under shifting cultivation (MSDR, 2006). The percentage of jhum rice area as percentage of total rice area in the district has been on the decline and stood at 0.08 per cent in 2003-04. According to one estimate Manipur has the largest area 360,000 hectares where jhum or shifting cultivation is practiced. Every year close to 90,000 hectares of land is cultivated this way by close to 70,000 households. It is pointed out that the peculiar land tenure system that exists in the hills where all land is owned by the community is largely responsible for the continued practice of jhum cultivation. In order to ensure the subsistence of families the village head or the council divides the jhum land among them on a rotation. Friends of Women s World Banking, India Page 3

2 to 4 acre (Semi-medium) 51 33.33 2.67 (2.52) 4 to 10 acre (Medium) 17 11.11 4.96 (5.03) >.10 acre (Large) 1 0.65 17.5 (13.13) All 153 100 1.09 (1.22) Households reported no settled agricultural land 28 Source: Filed survey; DES, 2004. Note: Bracketed figures are average operational land holding size reported for the state of Manipur for the year 1995-96. 1.2.2 Occupational Profile: Non-agricultural The survey of the households reveals that the households also pursue a variety of activities other than agriculture. Among these, the commonly observed generation activity is weaving (Table 4). Though only 35 per cent of the sample households reported that they make an out of weaving, several of them possess looms. Handloom is traditionally considered as a socially valuable household asset that can also take care of the household level requirement of basic clothing. It may be noted that handloom weaving is the largest and the most important cottage industry n the state. According to the National Handloom census report of 1996-97, there were 3.39 lakh weavers in the state with 2.77 lakh different looms producing 86.40 lakh linear metre of handloom cloth per month (www.investinmanipur.nic.in). It is estimated that in the district of Senapati there are 689 looms for 1000 households. Apart from weaving, the households are engaged in a variety of activities ranging from running shops to pig rearing, trading in goods bought from Moreh (the town in Chandel district which is the centre of trade between Myanmar and India), operating rice mill, hotel/tea shop etc. Friends of Women s World Banking, India Page 4

Table 4: Income Generation Activities (Non-agricultural) Pursued by Households Activities No. of Income generating activities Weaving 36 35.29 Grocery/ general purpose shop 8 7.84 Trading in goods bought from Moreh, Guwahati etc 6 5.88 Piggery 5 4.90 Stone crushing/ sand collection 5 4.90 Carpentry 4 3.92 Rice mill 4 3.92 Renting tractor/ truck 2 1.96 Tailoring 3 2.94 Pan shop 3 2.94 Timber felling/ trading 3 2.94 Hotel 2 1.96 Pharmacy 1 0.98 Tea shop 1 0.98 Butchery 1 0.98 Dairying 1 0.98 CD shop 1 0.98 All 102 100 % share in all activities The dependence of the sample households on forest produce both timber and nontimber - is evident from Table 5. Close to 18 per cent of the surveyed households earn from forest produce, of whom 62 per cent depend on spices (mainly ginger), vegetables and fruits (mainly banana) 3. Of the total generated by the households from forest produce, timber constitutes 41 per cent and non-timber produce, 59 per cent. Interestingly, s earned per household from selling timber and non-timber forest produce do not show any significant difference, statistically speaking (t = 0.239; p = 0.812). 3 The list of forest produce collected by the households include cabbage, mustard, radish, colocasia, pumpkin, chillies, cucumber, mushroom, bamboo shoot, beans, corn, ladies finger, carrot, pulses, ginger and banana. Friends of Women s World Banking, India Page 5

Table 5: Households Earning from Forest Produce % of gross Average % of Forest produce Number of households reported (Rs.) from FP Timber 17 23.92 7250 40.66 Spices, Vegetable and Fruits 28 14.14 6424 59.34 Total FP 45 17.83 6736 100 When we put all the sources together (Table 6), it becomes clear that households that earn their main from service are much ahead of others. Such households are dominantly present across the lower landholding classes (Appendix Tables 2a and 2b). Though small in number, households that receive in the form of remittance come next. Farming appears to be generating lesser compared to both service and petty enterprise activity. It may be noticed that households (64 of them) with s from both agriculture and service are found on an average earn the highest, i.e., Rs. 92,979, and thus are positioned in the upper most bracket as far as the local economy is concerned. Agriculture labour households, as expected, stand very low in the hierarchy. Tables 6: Number of Households and Mean Income by Source Source of Number of households Average (Rs.) Farming 166 16,689 Petty enterprise activity 122 21,429 Agriculture labour 105 3,899 Service 78 62,233 Manual labour 56 12,738 Non Timber Forest Produce 28 6,424 Interest 22 8,016 Other 20 27,245 Remittance 14 31,714 Rent 7 9,300 All sources 194 66,475 1.2.3 Other Assets: Livestock Holding In terms of livestock holding we found that the average livestock holding of the surveyed households is broadly in correspondence with the district average (Table 7). Livestock is considered to be one asset valued by rural households as they serve as a store of value (as they can be converted in to future consumption) as also yield direct consumption services. Often, they are symbols of prosperity (Bertola and Hochguertel, 2005). As for assets in the form of agricultural implements, 84 per cent of the households that are involved in agriculture reported having ploughs, the basic agricultural implement, while nine households possess tractors (average market value = Rs.58356). Four have engines run on electric power. Friends of Women s World Banking, India Page 6

Table 7: Livestock Holding in the Surveyed Villages Livestock Total livestock holding No. of HHs Livestock Holding per HH Average current market value (Rs.) Fowl 305 59 5 (6) 1077 Duck 185 24 8 (3) 1528 Pig 99 49 2 (3) 7983 Cow 53 15 4 (2) 20423 Buffalo 21 19 1 (1) 15611 Source: Primary Survey; www.senapati.nic.in, for district level livestock population. Note: Bracketed figures are estimated livestock holdings for the district of Senapati. 2.1 Expenditure Pattern As shown in Table 8, food constitutes 27 per cent of the household expenditure of a typical household in our sample. Education spending comes a close second with 25 per cent share in the annual household budget while health accounts for 22 per cent of the spending. Of all who reported spending on education (128 households), 93 per cent send their children to private educational institutions. Similarly, 78 per cent of the health expenditure was incurred on private health institutions. In the case of education the difference in expenditure between private and public institutions has come out to be statistically significant (p = 0.03), but not in the case of health (p = 0.63). Table 8: Average Income and Expenditure of Households Amount (Rs.) Average from all sources 66,475 Average after excluding from service 41,510 Average annual household expenditure 38,657 Annual household expenditure on Food 10,519 (27.21) Festival 5,691 (14.72) Health 8,455 (21.87) Education 9,711 (25.12) Fuel, excl electricity 2,018 (5.33) Annual per head* 10,810 Note: *Average family size is 6. Friends of Women s World Banking, India Page 7

Table 9: Expenditure on Education and Health: Private vs. Public % share in Expenditure details Expenditure (Rs.) No.of households reported households Total Expenditure 38,657 190 Average expenditure on private education 9,599 128 93.4 Average expenditure on public education 6,824 19 13.8 Average expenditure on private health 7,822 65 78.3 Average expenditure on public health 5,885 20 24.1 Coming to the percentile distribution of households based on average, the results indicate the heterogeneity in the status of the selected client households (Table 10). The bottom 30 per cent of the households account for only eight per cent of the total reported, while 60 per cent of the is accounted for by the top 30 per cent households. Looking at it from the point of view of the official definition of poverty, one could say that 50 per cent of the WSDS clients are below the official poverty line, if one takes the poverty line as Rs. 387.64 4 (taking the family size as 6). Table 10: Average Income and Share of Income by Percentiles of Households Percentile Average Income (Rs.) % Share in total Bottom 10% 11,671 1.72 Bottom 20% 14,820 4.48 Bottom 30% 18,152 8.16 Bottom 40% 22,609 13.67 Bottom 50% 26,948 20.27 Top 30% 132,837 59.74 Top 20% 149,079 43.92 Top 10% 178,096 26.23 Top 5% 206,064 14.38 3.1 Saving and Borrowing: Broad Patterns Of the 190 households that reported savings, 93 per cent said they save with the SHGs, whereas 47 considered the liquid cash kept at their residences as savings. Not surprisingly, 26 per cent of the client households have been saving in Marups, the 4 Estimated for the year 2004-05 for the state of Assam. There was no poverty line estimated for the other north eastern states. Friends of Women s World Banking, India Page 8

traditional rotational saving groups found widely in the region. Only 13 percent of the households have accessed the services of banks in saving. While this the case with share of households across use of saving options, we find that of total saved amount, 39 per cent lies in liquid form with the clients houses. Banks, though accessed by a fewer households, account for 36 per cent of all savings. Both SHGs and Marups claim only small shares of savings, despite having larger share in outreach. Since the sample has households with service, one finds close to two per cent respondents having social security savings like regular contribution to provident fund. 99 (51.03 per cent) households have insurance policy Table 11: Place/ Form and Amount of Savings Form/ place of No of % of Total Average % share saving reporting reporting savings savings in households households (Rs.) (Rs.) all savings Cash in hand 90 47.37 631250 7014 39.07 Bank 24 12.63 576492 24021 35.68 SHG 176 92.63 202668 1152 12.54 Social security 3 1.58 303600 101200 18.79 Marup 49 25.79 211320 4313 13.08 Other 14 7.37 43900 3136 2.72 Total household savings 190 100 1615688 8504 100 Only 161 of the 194 client households reported having borrowed during the one year preceding the survey. And, 76 per cent of them reported loans of sizes varying between Rs. 1000 and Rs. 5000. This is reflected in the medium for all the households which is only Rs. 2000. Nearly three percent of the households reported borrowings above Rs. One lakh. It is interesting to note that 39 per cent of the households borrowed for the purpose of investing in some production related activity. In terms of purpose, consumption comes next with 25 per cent households reportedly having cited it as the reason or borrowing. Twelve per cent did not specify any purpose. Incidentally, the average borrowing is the highest in this category. Also noteworthy is the relatively larger average size of consumption borrowing. Table 12: Reported Borrowing of Households (during one year preceding the survey) Reported borrowing (Rs.) Number of HHs % of HHs % share in all borrowing Upto Rs. 700 17 10.56 0.42 700-1000 29 18.01 1.61 1000-2000 42 26.09 4.14 2000-4000 28 17.39 5.43 4000-5000 23 14.29 6.39 5000-10000 7 4.35 3.06 10000-50000 6 3.73 7.51 50000-100000 5 3.11 20.85 Friends of Women s World Banking, India Page 9

> I00000 4 2.48 50.60 161 100 100 Table 13: Purpose of Borrowing of Households Average Purpose of borrowing Number of Responding HHs % of HHs borrowing (Rs.) Investment in assets 27 16.77 2089 Production related investment 62 38.51 5106 Consumption 41 25.47 8205 Debt repayment 1 0.62 5000 Purpose not specified 19 11.80 55500 Other 11 6.83 2970 Total 161 100 3700 As far as the source of borrowing is concerned, Table 14 suggests that clients access to these sources remains limited in the surveyed villages. SHG has emerged as the predominant source of loans here since 2000.. Table 14: Source of Loans for the Sample Households Source of Loan No of HHs % of HHs Formal Government 9 5.63 Commercial Bank 4 2.50 Cooperative society 9 5.63 Informal Money lender 7 4.38 Relative/ Friend 8 5.00 SHG 115 73.20 Others 8 5.10 Total 160 100 Conclusion WSDS Friends of Women s World Banking, India Page 10

Appendix Table 1: Distribution of Average Annual Household Income by Village Village Average Income (Rs.) Y. Langkhong 17,888 Thangal Surung 34,248 T.Thangkan 77,541 S.Buning 103,347 Pheizang 62,692 N. Songlung 49,040 Motbung 88,572 Makhan 47,199 Leikot 62,408 Langkhong 29,754 Kholip 69,970 Khokheng 82,894 Khenjang 75,268 Gambiphai 110,693 Appendix Table 2a: Distribution of Households by Occupation and Land Holding Category Landholding category Source of Landless Marginal Small Mean (Rs.) % share in all Mean (Rs.) % share in all Mean (Rs.) % share in all Income from agricultural produce 11423 9.00 12504 20.75 18548 25.56 Agricultural wage 2008 1.19 6562 7.86 2699 2.48 Non agricultural wage 16769 7.44 9893 6.38 5318 2.24 Forest produce 8475 1.67 3678 1.02 11486 3.96 Petty enterprise 23221 14.87 24724 17.09 20496 22.76 Salary 80100 47.36 53900 34.78 63038 38.61 Rent 24000 1.18 9900 0.38 Interest 2740 0.40 2893 0.40 14200 1.63 Remittance 32000 6.31 27000 4.98 6000 0.23 Other 25000 2.46 21833 6.04 9000 0.69 All 72487 100.00 54238 100 63708 100 Friends of Women s World Banking, India Page 11

Appendix Table 2b: Distribution of Households by Occupation and Land Holding Category Landholding category Source of Semi medium Medium Large Mean (Rs.) % share in all Mean (Rs.) % share in all Mean (Rs.) % share in all Income from agricultural produce 16896 23.09 21195 22.11 40863 57.47 Agricultural wage 3368 2.71 4047 1.90 2350 1.10 Non agricultural wage 14432 5.99 20700 4.32 37250 17.46 Forest produce 2902 0.71 3878 0.81 Petty enterprise 17507 17.52 20632 9.69 15120 7.09 Salary 45746 29.03 96400 55.32 Rent 6000 0.59 7200 0.38 Interest 7405 1.81 14267 2.23 Remittance 100000 2.44 22000 3.44 36000 16.88 Other 36211 7.95 20000 1.04 All 66094 100 91279 100 71103 100 Friends of Women s World Banking, India Page 12