Genesis (As explained by Stan)

I think understanding why we thought of the bank is very crucial to its design. Much of the advice we have received is without this understanding and so has only limited relevance.

There are a number of strands: We refused to jump on the microfinance bandwagon for a number of reasons - too numerous to list here but suffice it to say that the primary reason was our fear that though there would be a easy and significant infusion of capital in the form of loans it would eventually end up in a net outflow of wealth from the local economy into the mainstream or dominant economy. The experiences of a number of MF federations has borne out that we were sadly correct. Rural indebtedness has increased to levels that are beyond the sustaining capacity of the local economy. 

However, one could not deny the need for credit and the need to find an alternative to exploitative money lenders. We needed solutions that reduced or eliminated the vulnerability of the poor to their lenders.

This brings us to our next strand. When we started ACCORD there was a band of young adivasis who had committed to work for their community, which we had visualized. ACCORD was to play a catalytic role and be able to pull out after 10-15 years of engagement. But these youngsters were giving the best years of their working life with no back up plan. Hence I convinced our donors of the time to pay Rs.250/- extra per month per person over and above the agreed salary. This amount was invested in the Indira VIkas Patras of the time which doubled itself in 5 years. The understanding with the team was that on maturity the Rs.250 (which would now be Rs.500) would be reinvested and another 5 years later would yield Rs. 1000 which could then act as a pension if ACCORD withdrew. At the end of 10 years when the first batch of IVPs matured, it was obvious that a) ACCORD would be continuing for some more time b) the team therefore did not need monthly incomes as much as lumpsum amounts for housing etc. So it was agreed that rather than encash and distribute the matured IVPS the money would be pooled and loaned to each other as and when they needed. This was called the ADIVASI MUTUAL FUND. Each month when an individual's IVP matured they could take the interest but the capital of Rs.250 would be invested as a "share" with the AMF. Every year the "profits" (interest from loans) would be disbursed as a dividend according to each person's shareholding in the AMF. This was a highly successful initiative - whereby we met the credit needs of the community, grew the capital base and was also able to distribute dividends.

The success of the AMF has always made us want to expand this to the community. BUT the issues are a) ensuring repayment and b) ensuring a steady inflow of capital. This was what sowed the seeds of the idea of having our own bank - based on share capital from the members.

Yet another strand was that at a Mahasabha in 1995 the adivasis decided to go down a path of self reliance - and having their own institutions was seen as the cornerstone for building this self reliance. A Health institution (which was already in place at the time), an educational institution (which became Vidyodaya), a marketing institution for which we developed the Adivasi Tea Leaf Marketing Society (ATLM) and a source of collective wealth for which we bought the 176 acre Madhuvana Plantation are all some of the institutions we have established that are owned and managed by the community as part of the strategy for self reliance. At the Mahasabha the need for a financial institution was also raised and has sat on the back burner till now. Hence the bank is seen as a tool for self reliance.

Finally and perhaps the most important strand is the fact that our entire work is based on a social justice framework which has a very clear understanding and analysis of power relationships. Over the years everything we do is done in a way and manner that seeks to address inequal power relationships. As our people have moved irrevocably into a cash and capital economy we find that while they have addressed power relationships in various aspects of their lives, in the cash and capitalist economy they are essentially powerless - all money in their hands is used primarily for revenue expenditure and so no accumulation takes place. But at the same time we are afraid to bring in a pure capitalist model of wealth accumulation at the individual level. We needed to think about a model which was rooted in the adivasi world view - where collective wealth supersedes individual wealth. A community bank seemed to be an answer.

There is yet another concept which I have been developing called Participative Capital - but this is another story which we should put on hold for another conversation. But the basic idea is to raise capital on very different premises from the current model of return on investment. While we can discuss this later, I am raising it here because we felt having our own bank would perhaps be a very good vehicle for us to launch our concept of participative capital.

It is against this backdrop we thought of starting our own bank. From the community's perspective there is also a very pragmatic strand - more and more the government demands bank accounts to disburse social welfare benefits. The formal banking system is still out of the reach - both physically because of distance and psychologically - of our people. So having our own bank should address this issue also they feel.

Right now there are a few issues that concern us and for which we are seeking clarity as we go forward:

a) What is the best legal framework? Cooperative Bank or Cooperative credit society

b) Do the financials stack up and can we actually run a successful business.

c) How do we manage risk? 

d) What are the steps to take it it from a concept to reality - to operationalise the idea.