Discussion after the First Meeting (E-mail)

SM: It was an absolute pleasure…these 2 days. I’ve almost begun to disbelieve in corruption, distrust and similar facets of our larger society.

Stan: One of the hall marks of our way of working has been that everything has been trust based - not just at the financial level but also at work level. Hence we have not had anybody functioning as "supervisors". People have been required to take responsibility and provide leadership - but we have resisted creating supervisory posts. This fitted in perfectly with the adivasi way of working but as we grew larger and have had to take on a new generation of people who have been more exposed to the "ways of the world", it has been a struggle to continue to work in this trust based manner. I still feel it is important but at the same time we should not be blind to danger of people yielding to temptation and outside pressures. So our system has to be one - which everyone mutually agree to - which will have its own checks and balances - not based on distrust but minimising the danger of temptation.  

SM: I’d like to  summarise my takeaways from the visit and proposed action plan.

1.     We discussed and obtained certain clarity on the needs of a bank to the Adivasi community. (To be elaborated separately.)

2.    We understand that there is a definite disconnect between a bank of the mainstream and the bank, which can meet the needs of this community. While in the mainstream, the structure, processes, checks and balances are based on distrust, this community works on trust (by default). It would be regressive to create an entity on the same lines as in the mainstream.

Stan: This was an invaluable contribution from you during the meeting and has given a lot of clarity to everyone. We discussed this at length at the next meeting of all the area teams in Gudalur. I think we need to articulate this very very clearly and as Bharathan we shoould have a trust bank. This point of having a bank based on trust appealed to everyone and there was a very positive response. The idea of going "beyond banking" is very appealing and exciting. I think "beyond banking" should be the tag line for the Community Financial Institution (CFI).

3.       The formation and the working of the banking entity therefore should be follow the bottom’s up approach rather than begin with a bank in the mainstream. 

4.       There is a need to create a legal entity, which does not fall on the wrong side of the law and does not invite suspicion from entities such as the RBI, Income Tax Dept, etc.

5.       During our discussion, we notice the early signs of corruption of value system and participation in the circle of exploitation due to increasing interaction with the mainstream. (Can be elaborated.) More than intentional exploitation by individuals, systemic exploitation will always ensure that expenditure is more than income.

6.       Structurally, the role of a bank is pivotal in the functioning of an economy. However, this is true about the mainstream because ‘money’ serves as the only medium of exchange. In the case of this community, if money (i.e. same currency) continues to play this role, the convergence of this community in the mainstream appears inevitable, which also may be regressive in nature. In other words, if the adivasis earn largely from the mainstream and spend in the mainstream, the corruption of value system and exploitation are inevitable.

7.       Therefore, the formation of a bank on the value system of the community must be coupled with efforts towards self-reliance.

8.       Given the size of the community, the skill sets, the value system, it is possible that the community becomes largely self reliant in satisfying a reasonably good lifestyle and becomes independent of donations. (Needs to be elaborated.) The wish to be self-reliant has also been expressed by the community.

9.       Therefore, only as much money needs to be earned from outside, as is required by the community to spend outside. This can be further divided into capital account and current account. The community must work towards achieving a surplus on the current account enough to fund the capital account deficit, if any. This will obviate the need for any donation. This however, may need to be planned over a medium term (say 3-5 years). The evolution of community enterprise appears to be very critical.

Stan: This (capital account vs current account) will require little more explanation and elaboration. The idea of being able to generate enough funds to obviate the need for any donation is exciting to say the least. Our proposal to Tata Trust includes a very sketchy plan to arrive at this point in precisely 3 - 5 years time frame. Out idea to do this is a) through community enterprises and b) by getting people to become direct "participants" in the GUdalur  initiative and supporting this by paying an annual donation. However, for clarity I like to make a differentiation between community enterprises and social enterprises. Community enterprises are ones where we support setting up an enterprise where  community members are direct and sole beneficiaries. where the profit or surplus as I like to call it goes to the participating members and will not go to "NGO" type activities like the school or hospital etc. On the other hand we can have social enterprises like Ecoscape where the entire surplus goes into a common pool to be used by the various service providers of the community. But after our recent pilot of marketing 4 tonnes of honey my thinking has slightly changed. I feel collection of honey can be community enterprise but the marketing of the honey can be a separate social enterprise. Part of the reason is that as it marketing to the outside world we need a very different kind of person/s for the marketing. But this is not a major issue or point. Just for own clarity it might be good to realise that we can different kinds of community enterprises.

At another level - we should perhaps look at the hospital and school as enterprises providing specialist services. So rather than they raising funds, the community pool should be able to either pay fees (as in the case of the school) or insurance as in the case of the hospital. In the case of the hospital we did set up a very successful community insurance programme.

But based on our discussion here is what I am thinking - achieving it will be a challenge - but that the fun isnt it? Also I might be too idealistic. Rather than collecting insurance premiums from people as we are doing now - perhaps we can a system where we say if you save XXX amount in a year your insurance for next year will be paid for. Or if you save XX your children’s school fees will be paid for. So it is a single point of collection from the community by the CFI. 

I really like your idea of the bank taking equity in the community enterprises - ensuring a more appropriate management structure which neither ACCORD nor AMS might be able to put in place given our histories and current structures and ways of working. I am quite convinced that we NGO types should not invest in and try to run businesses.      

SM: Since the formation of the bank is very closely linked to the above, there needs to be an agreed approach and plan.

Plan of Action

·         A process for the savings programme needs to documented. The existing process will serve as the base, which can be improvised to cover any loop holes or risks. Ensuring real-time information flow at account level will be critical. I will circulate the broad heading of processes, which we must document. Someone from the local team may need to help me detail the steps as followed currently. We can then run a pilot for a few weeks before rolling it out to the entire population.

Stan: Great. I agree that this is the starting point. We had two Australian students who did some documentation. We will have to revisit it to see if it is of use in the current context. There is also the issue of closing and drawing a line under the current savings programme. Our accounts at the individual pass book level, the area level and the AMF level do not tally. Attempts to reconsile have not yielded much fruit. I think it is best therefore to accept the individual pass book as the correct and final account and proceed from there. This process has already been initiated and needs to be completed at the earliest. We can then re-launch the programme with all the loop holes, gaps etc plugged. It is important that this is seen as a new and improved entity because people's confidence has to be re-established. 

·         The savings program structure can also be re-looked at, if it needs to be made more encouraging by offering interest on savings. But this may not be an urgent requirement and the need to pay interest can also be debated. Since it is a community enterprise, there may be no need to make a ‘spread’. If interest has to be charged only to cover operational expenses, we may be able to lend at 2-3%. If we pay interest on deposits, the borrowers will need to fund it by paying higher interest.

Stan: I think a low interest or even no interest lending system for teh community is very welcome. But again I repeat your idea of the CFI lending to or taking equity in and thus generating surplus is perhaps the solution. ALso your suggestion that interest can be offered in kind (hospital insurance) can rather as cash. I think this will be more attractive to people.  

We need to assess the number of people, who require a bank account to receive MNREGA funds and other govt subsidies. We can then speak to Axis Bank, if they can camp for a few days and open the accounts or we need to become their Business Correspondent. Current bankers of Accord or any individual may also help if there is a good enough contact person.