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Microfinance and Social Pressure in India: A study of SKS.
Mathew Joseph
Address
E-mail: mathewteekoy@gmail.com
Abstract
This paper uses a combination of secondary analysis and observation to explore the role
of social pressure in the micro-finance industry in India. It reviews the arguments for
micro-finance and explores its rapid growth in India. It then examines some of the ways
in which micro-finance was alleged to be implicated in a wave of rural suicides. Taking
one organisation it explores its formal and informal practices and raises the issue of the
extent to which the gaps involve organisational silences which may have contributed to
difficult social pressures on the poor in order to sustain high repayment levels.
Key Words:
Micro-finance, poverty, India, suicides, organisational silence
Biographical Note
Matthew Joseph has an undergraduate and masters degree from Mahatma Gandhi
University in Kerala in India and a British MBA. He gained management experience on
India and worked for a year in Hyderabad , in Andhra Pradesh in the micro-finance
industry.

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1. Introduction
The attractiveness of the microfinance initiative partly relates to claims about its intrinsic
merits but also because it fits in with a particular way of viewing the economy,
globalisation and poverty. In the decades after the Second World War the dominant
discourse focused around the role of the state as a market regulator, state directed
development, poverty, injustice and exploitation. However from the 1980s these ideas
were gradually replaced by a supply focused approach. According to this view ‘markets
work’, provided that prices are right and incentives are appropriate. Development was
therefore to be a more spontaneous and harmonious process which would occur naturally
as the market was given more scope. Discussion of exploitation and positive transfers of
income from the top down on the other were no longer seen as central to poverty
alleviation.
This neo liberal discourse also claimed to be a discourse of opportunity and in this
context the market recognised neither skin, religion nor gender. Microfinance fitted this
new approach well because it seemed to offer the possibility of establishing property
rights and modest capital accumulation for the poor with a particular place for poor
women. Microfinance appealed especially to big western institutions which could use
their support for it as a way of legitimising what might otherwise be seen as indifference
to the fate of the poor in general and women in particular. No less it also appealed to
established powers within countries who also saw it as a useful talisman.

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An extensive set of claims with supporting policies and literature were therefore soon
developed to praise of micro finance. A typical example of this ‘booster’ approach can be
found in a work like Saris On Scooters by a Canadian, Sheila McLeod Arnopoulos, a
book endorsed by the CEO of the Women in Banking network. Interviewed about her
work Arnopoulos explained that
‘During four trips to India I knocked around Indian villages and city slums mostly
in Andhra Pradesh and Gujarat where I met poor but dynamic women taking
microcredit loans for small businesses. To witness their lives up close, I
sometimes lived with them in their huts. Feisty and fun to be with, many joined
cooperatives that burst into the mainstream economy by starting a dairy and
creating cutting-edge ventures in construction and embroidery. Not content to be
left behind, street vendors in the Self Employed Women’s Association were setting
up malls in the city of Ahmedabad and selling highly-valued organic produce to
an up-scale market’ (Margaret, 2010) .
Others speaking on behalf of microfinance include its progenitors like Mohammed
Yunnis whose efforts led the award of a Nobel Prize. In India and the United States one
of the most best known advocates has been Vikram Akula whose semi-autobiographical
account A Fistful of Rice was published in 2011 by the Harvard University Press. Akula
developed the Indian micro-finance organization SKS (Sway am Krishi Sangam)
Microfinance Ltd and was featured as one of Time Magazine’s 100 most influential
people on the planet. However more sceptical voices have been raised in the press and

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wider media and not least in India where an apparent epidemic of rural suicides that first
raised questions about the nature of poverty and poverty alleviation strategies.
Sociologists and anthropologists who have concentrated on village relations have also
expressed scepticism.
This paper offers a third perspective. It looks at the practices of SKS, the most prominent
micro finance organization in India, through an examination of the organization’s own
documentation and field observation of its processes. This is possible because the author
worked for a period for that organization and in this sense was a participant observer
although it was only possible to begin to fully reflect on the significance of this after he
left the organization.
Section 2 sets the scene by exploring the arguments for micro finance. Section 3 looks at
the development of micro-finance in India in relation to the problem of rural poverty.
Section 4 then considers SKS practices and the role of micro-finance in the Indian
‘suicide epidemic’. The final section concludes by arguing that the story told here has
wider implications. Micro finance is much more contradictory and ambiguous than the
accounts of its supporters allow.
2 Micro-finance, Credit Poverty and Gender

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I strongly believe that we can create a poverty-free world, if we want to… In that
kind of world, [the] only place you can see poverty is in the museum. When school
children will be on a tour of the poverty museum, they will be horrified to see the
misery and the indignity of human beings. They will blame their forefathers for
tolerating this inhuman condition to continue in a massive way… (Yunus, 1999
as quoted in Bateman 2010, 6).
2.1 The Rise of Micro-finance
Microfinance is a banking concept popularized and developed in Bangladesh by
Mohammed Yunnus after the devastating famine of 1974. Yunnus set up the Grameen
Bank Project which eventually became Grameen Bank in 1984 believing that micro-
credit could gradually but steadily lift the poor and bring about a ‘positive impact on the
life of its borrowers’ bringing local development in Bangladesh ((Latifee, 2006;
Bateman, 2010, Morgan, 2011). For Yunnus, what differentiates microfinance from other
methods of credit delivery in the developed world are:
The small size of the loan : The average loan size of Grameen Bank was approximately
$70 which could be invested in income generating activities (microenterprise).
Lending largely to the disadvantaged/poor women : The fundamental reason for focusing
women is the belief that women are likely to spend the maximum of their income on

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household affairs, hence micro help is twice blessed: it helps not only women but also the
welfare of the whole family is improved.
The role of peer pressure or social collateral in replacing physical collateral: Grameen’s
‘wominnovation’ (The Economist, 2010) of ‘solidarity groups’ evoked a sense of union
and feminist traditions among poor women in particular. These women are given small
amounts of loans based on the ‘group guarantee’ rather than physical collateral.
Effective implementation of these factors are argued to ease the risks for the
‘unbankable’ section of society. These involve the issues of targeting, the evaluation of
credit worthiness of borrowers and the final implementation of credit contract making
socially or collectively responsible lending a ‘win-win’ affair ((Hulme, 1996; Morgan,
2011).
The perceived ability of the microfinance institutions to target poor, rural women as
entrepreneurial agents led to accolades and acceptance among mainstream financial
institutions and NGO’s besides politically influencing many developing countries across
the world (Rankin, 2002). One financial institution that embraced this model of small
scale banking was the World Bank. In the early 1990’s national donor agencies like
USAID and ODA-UK also initiated large micro-credit programmes and accepted micro-
credit as an integral part of the neo-liberal poverty alleviation strategy (Mayoux, 1999).
In countries like Indonesia the microfinance movement was undertaken by the state
owned Bank Rakyat Indonesia (BRI) and in countries like Malaysia, Yunnus himself was

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behind the establishing of micro-credit institution similar to the credit delivery and
recovery of Grameen Bank (Bateman, 2010). Within developed countries like the USA
too micro-lending model became the basis for a large number of community development
and rural development programmes.
But as the core concept of microfinance spread across the world the institutional form of
microfinance also became more varied. Some microfinance institutions offered diverse
financial services like micro insurance while others offered relatively higher amount of
loans which, it might be argued, was inconsistent with the original aims and which would
provide problems for those who took them.
2.2 The Rationale of Microfinance
At least a third of the world’s total population still faces grinding poverty and more than
half of the world’s population is deprived of mainstream banking and other financial
services. Estimates show that over 1 billion people around the globe survive on less than
$1.25 a day, and additionally 1.6 billion are slightly better off and live on between $1.25
and $ 2 a day (Khavul, 2010). India, (because of the rapid growth of China) now has the
largest number of people living on less than $1.25 a day. (Deaton 2005)
Previously, tackling poverty and promoting rural economic development had been the
task of states and the large intergovernmental organizations like the World Bank,
International Monetary Fund and United Nations, where the development economists

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designed strategies and programmes in close collaboration with donors and recipient
governments hoping to trigger economic growth in the developing countries (Sachs,
2005). These earlier publicly driven programmes were top-down, poorly structured, and
executed through official government channels in those developing countries where the
government administration is at its weakest and corrupt, bureaucratic webs existed
(Easterly, 2006 in Khavul, 2010). It is against this approach that a bottom-up,
entrepreneurially driven solution for sustainability and economic development assumes
greater importance (Aghion and Armendariz de Aghion, 2004).
However, to get economic development through entrepreneurial activity, access to
financial capital is necessary and this can only come in the form of savings or borrowing.
But the poor live in a social and economic environment where such formal savings and
borrowings are neither present nor accessible. The money that poor women in particular
accumulate is vulnerable to depletion due to unintentional uses such as household
responsibilities and kinship obligations. (Mayoux, 2001) In an effort to control savings,
poor women living in urban slums or in a straw hut in a village in India have buried their
cash in the ground, tucked bank notes into rafters, or forced them into clay piggy banks,
some women sew money to their saris. But this money can be stolen, blown away or
simply may rot. In such poor economic and social living conditions, the link between
savings and investment becomes tenuous in the absence of safe, convenient and proper
banking services (Rutherford, 1999; Murduch 2004; Littlefield, 2004) Additionally, the
entrepreneurial endeavours of the poor often take place in the informal economy and their
businesses are unregistered and untaxed and as a result the agency and transactional costs

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of the traditional banks are enormous. (Schneider, 2005) In developing countries this
problem has grown as the level of informalisation has increased both in the country and
the town.
A traditional bank does not have adequate information about the creditworthiness of these
prospective customers mainly due to the fact that there are no institutional tools to
measure the credit scores of individuals like this in developed countries. (Khavul 2010;
see also Sriram, 2005). A second hindrance is agency risk. In developed economies the
banks go through information intensive ex-ante and ex-post investigation and monitoring
to avoid agency risk or moral hazard. This assessment of information is not practically
possible for the traditional banks when lending to the poor and the banks are exposed to
risks that are difficult to assess. The third hindrance is the transaction costs suffered by
the banks because of the small size of the loans and the geographic dispersion of the rural
borrowers. Moreover, the borrowers too need to pay additional transaction costs when
they travel to loan centres to make the repayments. Additionally, setting up distribution
channels to reach the poor also can cause additional expenditure for the financial
institutions. (Rugimbana, 2009)
Traditional banking services are, therefore, not available to the poor and informal
banking systems continue to play a key role in rural and impoverished areas (Khavul,
2010). This informal borrowing comes from friends, relatives, shopkeepers or from cut-
throat money lenders who often take gold as collateral (Murdoch, 2005). Although
informal and predatory, one cannot decry the potential advantages of these sources:

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minimal transaction costs as the borrower and the lender live in the same
neighbourhoods; quick loan disbursement; flexibility in repayment instalments and
frequency and considerations in collateral due to acquaintances. The real issue with the
credit from moneylenders and other informal channels is related less to the availability or
access to the credit but the terms and conditions of that come with it. Very often poor
women do not own gold/ jewellery to use as collateral to gain access to credit, in such
cases the pawnbroker and the moneylenders make astronomical charges as interest for
so called ‘unsecured or risky’ loans (Mayoux, 1995; Rutherford, 1999).
It is in this context that microfinance emerged as a major innovation in the rural financial
market, ‘it (Microfinance) has tried to bridge the gap between formal institutions and the
poor by providing some intermediary mechanisms of transaction aggregation and
rationalizing transaction costs.’ (Saram, 2005, p. 78) The microfinance model interacts
directly with the individual and involves his/her ‘immediate community’ to foster
economic growth and empowerment.
The micro-finance group-lending model has three variants: joint liability, individual
liability and village banking (Khavul, 2010). Under joint liability, each member in a
group is not only responsible for him/ herself but for other members of the group.
(Bateman, 2005). This was the original model of Grameen Bank and it has been followed
by many MFI institutions in the world. In the individual liability model of lending there
exists no joint liability but the members are expected to adhere to other stipulated
procedures of group lending, like the borrowers joining together at specified intervals

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(weekly or biweekly) for loan repayments in the presence of the representative from the
microfinance institution. In the village banking model, the group is given a loan and the
loan is in turn allocated for the members. Leadership qualities are encouraged in this
model of lending, and group members are required to guarantee each other’s loans
(Khavul, 2010).
The advantage of the Grameen Bank’s basic model of microfinance is that it depends to a
degree on the role of ‘social collateral’ which arises by becoming a member in self-
regulating ‘solidarity circles’ (Rankin 2002; Bateman 2010). The solidarity circles in all
the three lending scenarios act as a guarantee against moral hazard and adverse selection
problems mainly faced by traditional model of banking. Although microfinance
institutions, like the traditional banks, do not have access to information about the credit
worthiness they hope to be able to rely on the local social network, the behaviour of
group members and the dynamic incentives of the group members to alleviate risk and
other transactional expenses (Khavul, 2010). This interpersonal trust forms the basis for
overcoming the information asymmetry and it does not require recording, storing and
retrieval of information. (Sriram, 2005).
According to Armendariz (2005) this practice means that safe borrowers fall into safe
groups and risky borrowers will only have risky members in their groups and this practice
takes place without the interference of the micro-lending organizations (see also
Murdoch, 2004). This peer monitored group lending not only mitigates moral hazard but
also substantially reduces the costs of borrower selection and monitoring process that are

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generally regarded as major hindrances to offering financial services to the poor by the
mainstream banks. In the micro-lending scenario the motivation for each member to co-
operate with other group members and to be able to comply with microfinance
institution’s loan delivery and recovery procedures is the eligibility for the next larger
amount of loan (Khavul, 2010).
2.3 Gender and Micro-finance
But we have also suggested that the attractiveness of micro-finance has a gender aspect
too. Supporters of micro-finance have designated women as the target group because they
are the most marginalized segment of society, and because women are argued to use
resources more productively than men (Rankin 2002).
‘Poor women see further and are willing to work harder to lift themselves and
their families out of poverty. They pay more attention, prepare their children to
live better lives, and are more consistent in their performance than men. When a
destitute mother starts earning an income, her dreams of success invariably
center around her children. A woman’s second priority is the household. She
wants to buy utensils, build a strong roof, or find a bed for herself and her family.
A man has an entirely different set of priorities. When a destitute father earns
extra income, he focuses more attention on himself. Thus money entering a
household through a woman brings more benefits to the family as a whole’
(Yunns, 1999 as quoted in Young, 2010, 206).

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It is poor women, who are seen literally and figuratively as the ‘heroic entrepreneurs’ (de
Sotto, 2000) and have become the latest currency of the development programmes around
the world. (Roy , 2002)
In the majority of societies the male members of the household are culturally endowed
with the responsibility of earning the livelihood and protecting the family members.
Kabeer (2005) observes that those men who are unable to perform such social roles
undergo tremendous stress and demoralization, which can eventually lead to domestic
violence, alcoholism and irresponsibility towards family. Traditionally, gender inequality
also prevails in women’s skills to perform tasks. Generally, what are perceived as
‘feminine skills’ are meant for, part-time, handicrafts and food processing works besides
combining household works (Mayoux, 1995, Standing, 1999). Restricted and chained by
prevailing cultural mores, lack of physical mobility, gender inequality, lack of equal
access to financial resources and illiteracy poor women are marginalized and vulnerable
(Kabeer, 2005). Their dependence on a male partner leaves them at what is called
‘patriarchal risk’ (Cain et al, 1979).
It is here that MFIs can play a crucial role in bridging the gender disparity by providing
poor women with access to credit, motivation and training in income generating
economic activities which can eventually lift the role of a subordinate-mother figure to a
financially independent individual whose potential contribution to the family and
immediate community can result in economic growth and development. Littlefield et al

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(2003) argue that women being family oriented, have better money managing skills.
Reports and research indicate that nearly all the MFIs in the world have found women to
be more co-operative and have less arrears and loan loss rates (Cheston and Kuhn, n.d).
Micro-finance is therefore seen not just as a method of empowering the poor but
empowering poor women in particular. Cheston and Kuhn (n.d. p. 12.) argue that
‘empowerment is about change, choice, and power. It is a process of change by which
individuals or groups with little or no power gain the power and ability to make choices
that affect their lives.’ However, gaining access to resources does not guarantee
empowerment or equality. For this to happen women must have the ability to use these
resources for their advantage. Women need to exercise decision making, negotiation and
manipulation processes on an everyday basis. Kabeer (2005) defines these everyday
processes as agency. Hence, the first step to women’s empowerment is the financial
independence that is the basis of making choices and decisions in life. MFIs are seen as
the shepherd of empowerment.
3. The Indian Experiment with Microfinancei
India was one of the centres of the microfinance movement that swept across the world in
the early 1990s. Microfinance was welcomed as a development tool with a focus on the
‘unbankable poor’. Based on the household income levels, the Indian population can be
broadly classified into four segments. At the top is a thin layer of some 0.6 million rich
households ( 0.3%) The Indian ‘middle class’ of some 11 million households (6%)

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forms a second layer and beneath them is a third layer that have been called ‘aspirees’
who might make up 41 million households (22%) and at the bottom are some 135 million
deprived households 72%). (Lok Capital 2010) The target groups of microfinance are
these bottom two layers and especially the bottom one.
The financial needs of the population of India are met currently by 50,000 commercial
banks, 12,000 co-op bank offices, 15,000 regional rural banks and 100,000 primary
agriculture societies. But the Indian financial system, despite its huge numbers and
density, has not been able to reach the ‘deprived’ segment of the Indian populations
thereby leaving these 135 million households without financial services.
It was with the establishment of the National Bank for Agriculture and Rural
Development (NABARD) in the year 1982 that the microfinance movement gained real
momentum in India. According to the National Bank for Agriculture and Rural
Development, the Indian microfinance experiment is more a kind of ‘relationship’
banking rather than ‘parallel’ banking elsewhere in the world (Chavan 2009). The Self
Help Group (SHG) movement in the early 90’s was a close variant of the Grameen
model. The SHG movement allowed poor women to form groups, like the solidarity
circle of Grameen, of no more than twenty to come together and gain access to a low-cost
micro loan from a lending institution (Bateman, 2010).
According to Chavan (2009) the NGOs have been the primary force behind the formation
and growth of the SHGs. They help the group to go through an ‘incubation’ period after

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which they will be linked to the banks (Ananth, 2005). In general terms this ‘incubation’
means that the SHGs become eligible to seek a loan from banks only after they reach a
certain level of maturity in terms of their internal thrift and credit operations. Since its
inception in 1992, the SHG-Bank Linkage Programme has financed about 2.4 million
households, making it a dominant model of microfinance in India (Chavan, 2009).
According to the data by NABARD in its 2009 report, the SHG-Bank Linkage
Programme had become the largest in the world and this massive outreach has gained
considerable attention from other countries keen to copy the model.
The MFI Bank Linkage model is managed by private institutions under the governance of
the Reserve Bank of India (Sinha, 2009). The MFI model, with the entrance of a large
number of NGOs and with the formation of the ‘Mutually Aided Co-operative Societies’
[MACS] in the year 1995 started gaining momentum in India. This model uses a number
of different methodologies, like the traditional SHG style of credit services, Solidarity or
Joint Liability of Grameen model and individual banking arrangements. After undergoing
a number of trial and error attempts and innovations the MFIs now mainly use a mixed
approach which is tailored for different regions and different target groups. The Indian
Government’s ambition to achieve greater financial inclusion among its poor has helped
to drive the MFI market. (Sinha, 2009).
NABARD (2010) has taken the view that micro-credit is the most important product
offering. This is mainly due to the fact that in India, savings, thrift, micro insurance and
other financial services form a very small part of microfinance space. In India most of

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the MFIs offer loans ranging between Rs 5000 to Rs 20000. With some 120-40 million
households in India out of reach of financial services this means a potential credit
demand of about Rs 1.2 trillion (CRISIL, 2009).
The data from the Credit Rating and Information Services of India Ltd [CRISIL] show
that as on March 31, 2009, the microfinance sector and the MFIs in India had an
outstanding total loans of 160 to 175 billion and 110 to 120 billion Rs respectively.
Surprisingly, according to CRISIL (2009,) there are more than 3000 MFIs, NGOs and
NGO-MFIs in India today, out of which nearly 400 of them offer active credit lending
services. Out of the 287 billion disbursements made in 2008-09, 187 billion was made by
the MFIs. Such results are indicative of the wider acceptance of MFIs capacity to
generate capital and resources, making microfinance operations commercially and
economically viable (CRISIL, 2009).
Andhra Pradesh (AP), a southern state of India with 85 million people, occupies a
prominent position in the Microfinance map of India and it is of no surprise that it has
been nicknamed the ‘Mecca of microfinance’ in India (Johnson, 2010). Since, 2000
Andhra Pradesh has witnessed an explosive growth in private MFIs in Andhra Pradesh.
The growth was so frenetic that for a period each year the total number of borrowers
doubled. Andhra Pradesh has nearly 6.7 million microfinance borrowers and besides
being the home of India’s leading MFIs including SKS, Spandana and Share, is also the
home of ‘Velugu programe’ a microfinance initiative started by the state Government in
Andhra Pradesh.

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But by 2005 the dramatic growth led to tension between MFIs and the bureaucrats in
Andhra Pradesh. Following a large scale protests of microfinance over exorbitant interest
rates and the coercive collection methods meeted out by some MFIs in the eastern
province of Andhra Pradesh in 2006, the Government intervened and stopped the
functioning of many MFI offices and asked them to write off the remaining repayments
from the borrowers (Ghate, 2006). Despite the crisis in 2006 in this region the
microfinance activities flourished aggressively until the whole MFI activities in Andhra
Pradesh were severely restricted after the Government of Andhra Pradesh in 2010
promulgated an ordinance. This was in part a product of a concern about the possible role
of micro-finance in a wave of rural suicides that become the subject of widespread
discussion in India and aboard.
4. SKS Microfinance Ltd
4.1. The Rise of SKS
To explore some of the problems and processes that lie behind this the paper now offers
a case study of SKS Microfinance Ltd, the largest MFI in India. SKS (Swayam Krishi
Sangam) Microfinance Ltd, Hyderabad, India - was launched in 1997 starting
microfinance operations in the Telangana region of Andhra Pradesh, part of the drought-
prone, semi-arid Deccan Plateau and one of the poorest areas of India. From its humble

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beginning of issuing the first microfinance loan of Rs. 1500 ($33) in 1998 to Anjamma, a
poor woman in Andhra Pradesh in southern India, SKS grew within a few years to
become the largest MFI in India. As of March 31, 2010, SKS had expanded its outreach
into 19 states across India and had 6.8 million poor members like Anjamma who invested
in income generating activities (SKS Annual Report 2010). According to the Mix market
data towards the second quarter of 2010 SKS had 6.2 million borrowers with USD 952.8
million gross loan portfolio (Mix, 2010).ii
To manage this rapid growth, in 2003, SKS
converted from a non-profit society to a for-profit company and received its Non-
Banking Finance Company (NBFC) license on 20th
January 2005. This legal structure
enabled SKS to access sufficient commercial funding, to expand its microfinance
operations and provide financial services to the poor across the country.
For SKS, the 800 million poor in India, provided unchartered business potential.
But the guiding principle of SKS has been the conviction that if poor people can access
lower interest loans, they can avoid falling into a debt trap. SKS began to provide the
poor with access to these loans, and thereby alleviate poverty.
Our guiding principle is to provide opportunity, not charity. It is better to provide
a continual stream of credit that will enable the poor to lift themselves out of
poverty rather a one-time charitable grant that may help in the short-term, but
will not make a long-term impact in the lives of poor people. We expect that in
addition to increasing the income of our members, SKS loans will also stimulate
the village economy. (SKS Handbook for Sangam Managers, 2008 8).

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On its website (www.sksindia.com, accessed November 20, 2011) SKS stated that ‘Our
mission is to eradicate poverty. We do that by providing financial services to the poor and
by using our channel to provide goods and services that the poor need.’ One of the most
important factors that allowed SKS to achieve robust growth rate over the decade is the
solid foundation it created in its credit delivery and recovery mechanism. According to
SKS, this outstanding track record is the result of disciplined methodology and the
powerful group lending model.
The basic methodology used by SKS to achieve this mission was the one invented and
popularised by the Grameen Bank but it was improved to suit its commercial
microfinance interests in India. According to Sriram (2010) the commercial methodology
comprises of the following elements:
 The target audience is identified using a poverty index. This guarantees
homogeneity among the potential customers.
 The organization of the customers into groups. In the group, individual liability is
transferred to joint liability and hence the problems of information asymmetry and
physical collateral are dealt with.
 The standardization of methodology, products and services which instils
discipline among members.

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The standardization of financial products and process worked in two ways. Firstly, SKS’s
emphasis on efficiency and standardization helped the organization to reduce its
operating costs and made administration and geographical expansion rapid and uniform.
SKS’s products, services, loan disbursement and recovery practices were uniform across
the breadth and width of India because every aspect of its operations was clearly defined
and documented.
But standardization also helps an organization to lose its identity among the borrowers.
Every MFI organization has nearly identical products with differences only in recovery
periods and the loan amounts. There was no unique feature that set apart one MFI from
other MFIs in terms of the micro credit delivery and recovery mechanism. Clients
therefore tend to treat SKS just like any other MFI organization operating in their village.
This lack of identity of an MFI was also observed by Rhyne (2001) in writing about his
experience with MFIs in Bolivia. According to his account MFI institutions are likely to
converge operationally to improve their efficiency to deliver loans quickly. However,
standardization then can create cracks and can fall apart if an organization does not take
into account the socio-economic and cultural nuances of a particular locality before it
tries to establish its roots.
SKS went public through its Initial Public Offer (IPO) in August 2010 and many
optimists hoped that an infusion of private capital would trigger faster and bigger growth
in terms of providing credit to the rural poor. The listing of SKS, suggested to some that
2010 was the year when Microfinance in India came of age.

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But the media reports about suicides in Andhra Pradesh then put the whole microfinance
system under the spotlight. SKS was one of the MFIs that was alleged to have used
pressure and coercive recovery practices which led to the suicides. (The Economist,
2010). Critics suggested that MFI giants like SKS had failed to control aggressive
growth while making large profits on the back of the poor. Investors also needed to share
the blame as they had encouraged MFI ‘ loan sharks’ to expand their business to make
their investments pay off (Rhyne 2010).
4.2. Organizational practices and the Magic Figure of 99%
In the best of circumstances high repayment rates are required for an organisation like
SKS to become financially sustainable and thus access large amounts of credit to on-lend
to its members. Standardization does not tolerate defaults, nor does SKS. In its 2010
annual report SKS claimed that it had a 99% of repayment rates with 6.78 million women
borrowers across India.
To gain a sense of how this might be achieved we need to explore the organisational
codes and practices of SKS. In 2010 the author worked for SKS as an Assistant Manager
in the Training and Member Services Department based in SKS head office in
Hyderabad, the capital of Andhra Pradesh. During my tenure I had the responsibility for
conducting the process/operational training of those who train the field agents. This
would be considered a significant position where the person enjoyed respect and position

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as a Head Office employee. The majority of the field staff, in contrast, would never have
a chance to neither travel to the head office nor to interact with the higher management.
I have been able, therefore, to use primary data drawn from company manuals and
training materials besides drawing on my personal experiences, memories and
photographs while working for SKS.
The ‘Handbook for Sangam Managers’ (the field agents) was the Bible for SKS field
staff. The manual was well drafted and contained step by step procedure for carrying out
the complete cycle of microloan disbursement to the loan recovery procedures. This
Handbook aimed to ensure that standard practices were followed across the organization
irrespective of the state or region. When failure in implementing the standard process was
recognised it always resulted in termination of the loan officers, and hence, more often
than not the manual was followed to the letter by the Sangam managers. The Branch
Managers made sure that they followed the procedures to the letter while carrying out
field activities.
At the time of a Sangam Manager’s induction programme every field agent is given a
copy of the ‘Handbook’ and a reference copy is made available at every branch for the
staff. He/she is expected to study the manual and internalise all the components from the
manual. Every activity at the branch and on the field with the clients takes place only in
accordance with the standard practices provided in the Manual. In theory nothing

24. 24
happens outside the manual. Additionally, I was able to observe SKS practices at first
hand on trips I made to the field and then later reassess my experience in the light of the
debate about the relationship of microfinance to rural suicides.
The ostensible reason that it seems SKS was able to achieve such a 99% repayment rate
is because of its meticulous formation of groups and implementation of peer pressure
among group members. Groups are the back-bone of the peer-lending model and strict
credit discipline starts with strong groups. Every loan officer in charge of a loan
disbursement in a rural village had to make sure that every group had the following
characteristics:
Table 1. Group Characteristics Demanded in SKS Microfinance model
Insert Table 1 Here
A closer look at the characteristics of a group tells us that no group is formed of strangers
or relatives. In such a scenario, information asymmetry is minimised, because everyone
knows about everyone and no group will be ready to take the risk of forming a group
with a defaulter. Another important factor underpinning the whole idea is that the
relationship is the beginning of a mutually trusted long relationship with each other and
the organization. The basic psychology applied here is that though the poor may lack
money they are rich in self-respect and dignity. All the MFIs, including SKS, have been

25. 25
able use this feeling of ‘social pressure’ of the poor women not wanting to be defamed
among their friends and neighbours by skipping loan instalments which would eventually
affect their own group and other groups in the centre.
According to its 2010 Annual Report, SKS also attributed its rapid growth to the solid
foundation it created as a result of its commitment to transparency on interest rates and
fair collection practices. SKS articulated a standardized set of policies and procedures
through a set of process manuals and handbooks. SKS has a division called Member
Services which consists of Area Mangers, Unit Managers, Branch Managers, Cashiers
and Sangam Managers (or Loan Officers) who make it possible for SKS to deliver its
financial services to the poor. As part of SKS’ standardized process and procedures, each
of the categories of employees in each field of work has a well defined working
handbook for standardized procedures and policies. The field staff were 87% of the total
number of SKS employees in 2009-10. It was these who directly interact with the loan
clients during and after the disbursement of the loan. 11% were regional office staff and
only 2% head office staff. (SKS Annual Report 2009-10)
In the formal loan delivery process it is only the Sangam Managers (Loan officers) who
directly interact with the loan clients. For the clients these loan officers represent SKS
values and principles or in broader terms they are the face of the organization. These are
the people who, according to the’ Handbook’ are completely responsible for the delivery
and 100% recovery of the loans and SKS has furnished them with a set of
systematically well defined procedures and practices. SKS proudly lists the cultural traits

26. 26
of the organization as teamwork; value for roles and teamwork – everyone has an
important role; respect for members; opportunity not charity; gender sensitivity; self
discipline; honesty and integrity; strong Belief in our staff; customer service. SKS insists
on every loan officer religiously following the instructions stated in the handbook.
During my association with SKS the strict following of the Handbook for Sangam
Managers and the periodical updates were central to the culture of the organisation..
4.3 Rhetoric and Reality – Rural Suicides
Suicide occurs in all societies and its causes remain disputed. Analyzing whether one
country has a higher level of suicide than others is fraught with difficulties. But what is
not in doubt in India is the sense that in the countryside agricultural conditions put a
severe strain on families. Micro-finance has then been identified as a further factor which
can intensify problems and it has been extensively discussed in the last two to three years
in these terms. By 2010 even the international press was reporting that in Andhra
Pradesh microfinance giants like SKS had been levying usurious interests and that some
of the loan officers had been were arrested for allegedly harassing microfinance
borrowers (Bellman and Chang, 2010).
Table 2 shows the official breakdown for the causes of suicide in India. However there
are two problems here. The first is that the recording of a death as suicide is notoriously
sensitive to cultural conventions and family sensitivities. The second is that to attribute a
specific cause is also a sensitive political, emotional and empirical problem. From the

27. 27
official data it might appear that only 2% of suicides might be attributed to ‘bankruptcy
or sudden change in economic status’ and a further 2% to poverty. However the largest
category is ‘other causes’ and the second largest category is family problems and the
third is ‘causes not known’. In a rural society with agricultural problems it is hard to
separate individual causes and attribute blame solely to one thing or another. One report
offers the poignant story of a 16 year old- daughter of a client who committed suicide as
she was ‘harassed and humiliated’ when the loan officer told her to take to prostitution to
repay the loan – an explanation of her death which does not fit easily into the recognized
causes of suicide as the loan belonged to her mother. (Microfinance Hub, 2010).
Microfinance Focus, an international online news media based out in Bangalore, India,
reported on October 28, 2010, 54 suicide death cases in Andhra Pradesh, within the
families of 7.37 million women who have borrowed from MFIs during the past six
months. The report also added a detailed list of the alleged victims of the microfinance
institutions in Andhra Pradesh prepared by the Gender Unit of SERP (Society for
Elimination of Rural Poverty) and the report claimed that these MFIs were using reckless
lending and coercive recovery practices that has led to the suicides (Microfinance Focus,
2010).
Table 2 Percentage Share of Causes of Suicide in India in 2010
Insert table 2 about here

28. 28
BBC News reported the case of the suicide of a woman named Mylaram Kallava, 45, who
hanged herself from a ceiling of her mud house in Andhra Pradesh after she failed to pay
a sum of $840 which she borrowed from four different MFIs. At the time of her death she
was in default for just over two months. ‘Her co-guarantors in the group came to the
house and asked her to explain. I think she felt ashamed’ said her daughter. ‘The micro-
loan recovery agents were due to come knocking by the end of that week. She did not
wait for them’ (Biswas, 2010, www.bbc.co.uk/news).
Arunachalam (2010) in his blog Candid Unheard Voice of Indian Microfinance narrates
the death of Zaheera Bhee, who apparently committed suicide on 13 September 2010 as
she could not pay back the micro-loans she took from MFIs. The case of Zaheera Bhee
was also highlighted in the 2011 Microcredit Submit Campaign. It is reported that at the
time of her death she had outstanding loans from as many as eight MFIs totalling a sum
of Rs: 160,000 ($3,500). The interesting fact is that she had spent most of the loan
amount for her daughter’s marriage. All that she could manage was Rs: 600 ($13) a week
by way of doing odd jobs, which was way too little for the weekly instalments of eight
MFIs (Arunachalam, 2010).
Zaheera had to attend eight group meetings in a week to repay the loan but ‘peer
pressure’ turned against her when she defaulted. When asked about the repayment
process, Nabee Sahib, Zaheera’s husband said ‘that is what which drove my wife to
suicide as she did not have the courage to face the group members, leaders and loan staff,
without making payments…’ He further told how MFI loan agents and including her own

29. 29
group leaders/members harassed him and his wife to make the repayment. He also
claimed that the loan agents and others had threatened and verbally abused him and his
wife besides embarrassing them in front of neighbours and friends for making the
payment.
Arunachalam (2010), in his blog, criticised the loan sanctioning process.
‘There are no serious procedures nor is there any proper questioning on purpose
and source of income before giving loans…. the loans are mostly used for
consumption /consumer finance purposes and/or clearing old loans and there is a
time until which these people can manage repaymen t… almost all the loans are
scheduled as weekly repayments. It is compulsory that the borrowers pay the loan
installment on the scheduled day of the week and the field staff/agents will not
leave the borrower’s until and unless the installment is fully recovered.’
He also gave a list of MFIs from which Zaheera had originally borrowed money. He
suggests that she has taken two loans from SKS named Pedda Loan (Big Loan) and
Chinna Loan (Small Loan) for an amount of Rs: 20000 and Rs: 14000 respectively.
Although, there has been no evidence that confirms that SKS’ loan agents specifically
resorted to coercive practices for credit recovery in the reported 54 suicides in Andhra
Pradesh, it is evident that SKS was also a party, explicitly or implicitly, to the over
burdening of the poor with loans for maintaining the financial figures to satisfy the
investors.

30. 30
Vikram Akula, the Executive Chairman, SKS Microfinance, conceded that ‘of the total
list, 17 people have had loans with SKS. But they have not committed suicide because of
defaults…’ (The Economic Times: Oct 15, 2010). However, Akula later accused other
MFIs for exercising pressure and adopting coercive practices for making repayment of
dues which drove some borrowers to commit suicide (Sriram, 2010). But in the case of
Zaheera she seems to have had two loans of her eight loans with SKS to repay from
earnings of just Rs: 600($13) a week. It seems to stretch credulity to suggest that she used
her earnings to repay only SKS loans and decided to default on the remaining six.
4.4. Analysing the Loan Officer in the Field
Given these media accounts of suicides among over-indebted clients in Andhra Pradesh,
India, and that the fact that SKS has accepted that 17 of the suicides were active loan
members of its organization, it becomes important to look at the degree of correlation
between what SKS says and what it has been the practice in the field. To what extent do
mounting debt stress, coercive recovery practices and stifling peer pressure arise by
accident or from scheming MFIs who are alleged to be making ‘hyper profits off the
poor’?
As we have seen loan officers are the immediate face of micro finance organisations like
SKS. They are the ones who get directly involved in the credit delivery and recovery
process. Despite SKS having a well defined handbook for the loan officers the primary

31. 31
reasons for the spate of suicides seem to involve over-indebtedness, coercive loan
repayment tactics and extreme peer/group leaders/loan officer’s pressure on the
borrowers. In one of my field visits in the Renga Reddy District in Andraha Pradesh, I
had an opportunity to interact with the members in a centre. While silently observing the
centre meeting procedures, I could not avoid noticing a few women skimming through a
pile of loan books to find the SKS loan book which, according to the procedure has to be
handed over to the group leader. When asked, one woman reluctantly showed me the
other books, which belonged to two other organisations - Spandana Microfinance and
Bandhan Microfinance. The client did not know the organization that had given her the
credit and she was confused with the meeting dates of other organizations from which she
had borrowed.
In the case of Zaheera Bhee, it was evident that she had two loans from SKS for a total
sum of Rs: 34000 ($680). But it is clearly stated that the centre head along with the
group verbally sanction the loan to a member. The problem is then who actually
processed and sanctioned these loans? In a close knit community where information
about a member is readily available why was Zaheera given a second loan just after 20
weeks into the first loan payment and was she not given adequate financial literacy
training by the SKS loan officer before making her a member of the group?
The second issue is then the purpose of the loan. SKS defines the rationale for giving
small credits to the poor women in its Handbook for Sangam Managers (2008) and other
related Manuals. It states that:

32. 32
‘The primary objective of the financial products and services are to enable people
to generate income, build assets and become self-reliant. Loans are NOT issued
to members for consumption purposes, such as marriage or the purchase of goods
(ex. TV). Examples include: Agriculture, Services, Livestock, Production, Trade
etc’ (Handbook for Sangam Managers, p. 12. 2008).
It is evident from the case study conducted by Arunachalm (2010) that Zaheera
committed suicide because she had used up both the loans (Big and Small) for
consumption purposes and not for income generation. Had she become an ‘heroic
entrepreneur’ the mishap might have been avoided but using micro-finance for
consumption loans is not unusual.
To avoid this SKS also has in place a mechanism called Loan Utilization Checks which
are conducted at specified intervals depending on the loan cycle the member is in. In
theory loan utilization checks help the organization to verify that loan funds have been
utilized for the designated purpose. The basic criteria for conducting this check for the
SKS borrowers are because:
 The repayment schedule is rigorous; if the money is misutilized then it may
become a burden for the member to repay the loan on time.

33. 33
 It builds rapport with the customer, creating a better understanding of their
economic situation.
 As per the SKS rules 100% of Loan Utilization Checks are mandatory in the first
year of the loan and 20% LUC is mandatory in the second year of loan.
But in this case there does not appear to have been any diligent loan utilization checks
conducted by the loan officers (Sangam Managers) to ensure that the loan was utilized for
the stated purpose by the loan client.
SKS also has a well defined loan recovery procedure. In the event of a loan repayment
issue, the Handbook for Sangam Managers (2008) defines measures to be taken and steps
to be followed. Every loan officer working for SKS is expected to follow the procedure if
there is a loan repayment issue: in instances of repayment problems, ask for reasons and
ask the members to be prompt in repayment going forward. if there is an incidence of
non-repayment in a meeting: hand over the Collection and Disbursement Sheet (CDS) to
center leader.
The Handbook for the Sangam Managers lists the following steps: ask centre leader to
obtain the full repayment amount before the Sangam Manager (Loan Officer) returns
after finishing other centre meetings; proceed to next centre meeting; inform the branch
manager about the repayment problem in the centre; after completion of other meetings,
return to meeting where repayment problem occurred

34. 34
SKS loan officers should follow every rule to the letter. But in both the suicide cases
discussed it seems that the clients had extreme psychological difficulties facing friends
and other group members after defaulting. It had become a matter of self-respect and
dignity in a way that now turned in on the defaulter.
This is consistent with my own experience. During one of my visits to a centre, I
witnessed what happened to a group that had repayment issues. The loan officer left the
place with a warning that upon his return the whole amount should be kept ready with the
center leader. It sounded more of a threat than a gentle reminder to the group that
microfinance is all about group responsibility and helping one another when needed. The
question that arises here then is whether the loan officer (Sangam Manger) is just acting
upon orders to maintain the financial targets or to keep the Portfolio at Risk (PAR) very
low or zero and whether they effectively act as another money lender in disguise
The 100% repayment is part of the zero Portfolio at Risk policy adopted by SKS. In the
Handbook for Sangam Managers (2008) it is stated that the Sangam manager (Loan
Officer) is the only one exclusively responsible for the recovery of the loans. This puts
additional pressure on the Sangam manager to recover the loan. In the case of both
suicides loan officers along with other members of the group (under JLG the entire group
suffers because of a defaulting member) seemed to have put undue pressure on the
member to repay the loan. Based on my own experience with SKS and taking account of
Arunachalam’s (2010) report, the loan officer would not have left the centre/ home/work

35. 35
place of the defaulting client until the money was paid. In both the suicides there is clear
evidence that the loan officers were chasing the borrowers for the repayment.
While working for SKS I have heard stories from my own colleagues about loan officers
staying overnight at the villages to collect the payment from borrowers. It was an open
secret that such reckless practices of loan recovery were considered inevitable and
acceptable by the SKS core management, which raises the question of where the problem
lies – at the higher levels of SKS management or at the level of the loan officers who are
forced to exert pressure on members for their own survival?
4.5. The Loan Officers and Organizational Silence at SKS
It is important to understand how SKS has been able to create structures and procedures
that effectively hindered the upward flow of information concerning issues with the loan
repayments. For Morrison and Millikken (2006) this involves an act of creating a climate
of silence where the voice of those working at the bottom of the pyramid is silenced or
unheard.
By and large, the field staff generally consists of semi-literate adults from poor socio-
economic backgrounds similar to the loan clients. The majority of the staff are male as
there is a quite a lot travelling and risk involved in the job profile; however, there is a
small percentage of female staff employed at SKS. Most often the field staff are recruited
based on a written test followed by a personal interview. Once selected, the trainee field

36. 36
agent would shadow an experienced staff for about three months until he/she learns to
perform the entire field and office works.
The remuneration system at SKS used to be incentive based. The basic salary scale of
these employees has been very low. Hence, they were given an opportunity to earn more
depending on the number of groups and centres formed. However, this incentive based
payment system was denied by Vikram Akula, the founder and the then Chairman of the
company during a discussion on Initial Public Offers in New York City along with
Mohammed Yunnus, by stating ‘SKS loan officers are not incentivized by loan size’
(Clinton Global Initiative, 2010). Based on my association with the organization the
claim of Akula is false - there was an incentivized pay system in existence for the loan
officers at SKS.
Subsequently, the Branch Manager and the Unit Manager were given a percentage for
driving and motivating the employees for expansion and diversification. This helped to
create what Morrison and Millikken (2006) call a ‘collective sense making through
shared perceptions’ at the field level. The other side of the coin is then the tremendous
pressure on the loan officers to recover loans. Loan officers are instructed to be soft and
gentle, however, the pressure on loan officers to recover loans is unimaginable. My own
experience at branches was that if a loan officer failed to recover loans it severely
affected his performance. Hence, even though, the Sangam Manger handbook says to be
moderate and gentle, in reality the loan officers are likely to resort to pressure to recover
the payments.

37. 37
I have observed many times during my branch and field visits that the issues at a
particular centre were not even brought to the notice of the respective Branch Manager
for the fear that the concerned field officer might lose his job or his incentives would be
slashed. Interestingly, each branch was graded according to the number of defaulters with
an A grade given to the branches with lesser number of defaulters. This has gave rise to
employees unhealthily competing for higher grades and incentives at the expense of
stipulated standard procedures. The entire business was driven by numbers and figures
and hence, the top management never encouraged the ground level employees to direct
any issues to the head office. During my tenure of employment at the SKS head office I
can hardly recall a single such issue that received my department’s attention.
Now, what is interesting at this juncture is the fact that the ground level employees were
‘pushed’ by the middle management to meet the targets. In the case of Zaheera Bhee, the
loan officer most likely had not conducted an loan utilisation check because of the very
fact that if they had followed the standards he/she would have fallen short of their targets.
A second important reason for field agents resorting to harsh recovery practice is because
each day they were expected to close the daily cash transaction on the computer which
was linked to the common database. Discrepancies in the cash transaction would not let
the loan officer perform his ‘day end’ function. This meant that if a loan officer failed to
collect the loan instalment from a centre, he would have to pay it from his own pocket.

38. 38
The paradox of the system therefore was that while there were not adequate controls to
prevent bad loan decisions, in the repayment system there was also no room for mercy .
The whole SKS management system implicitly or explicitly re-inforced the position of
the loan officer and silenced any doubts that they might have by creating a very rigid and
impersonal procedural apparatus
5. The Ambiguities and Contradictions of Microfinance
Explaining microfinance Mohammad Yunnis argued in a widely quoted claim that ‘This
is not charity. This is business: business with a social objective, which is to help people
get out of poverty.’ As a participant in the development of microfinance in India the
author also felt the attraction of this positive mission and played the part of an evangelist
for it. It is evident from observation in the field that the ideas of micro-finance can inspire
all its participants. Cynics might suggest that part of the enthusiasm of the poor was
coerced by their circumstances and the conditions of loans taken but it also seems evident
that there is enthusiasm beyond this and not least the existence of a community of hope.
However, participation has also involved doubts that have grown with experience and
analysis and the argument that micro finance is really a superior form of white collar
money lending also looks possible. There is an apparent paradox at the heart of the
micro-finance model which is that if it works then the poor eventually have less need of it
because as they rise above the poverty line they will have access to more conventional
means. But it is not clear how long this journey is expected to take nor how successful it

39. 39
is in part because there is no evaluation mechanism. Such a mechanism could be at the
level of society as a whole in terms of a significant reduction in the share of the poor but
it must also be seen to be operating at the level of individuals made less poor in
systematically generalisable ways. However many members appear, after several years of
participation to still be members. SKS does not claim and perhaps cannot claim that it has
fundamentally changed the situation of a significant percentage of those with whom it has
worked. We are now in a position to assess therefore whether the objectives of business
and social improvement are as compatible as Yunnis’s claims suggests particularly in the
context of the SKS organization which towards the end of 2010 was second only to the
Grameen Bank on a global scale and largest in India on the eve of SKS initial public offer
in the autumn of 2010.
In conclusion we will focus on three major areas of difficulty for the micro-finance
project as it is developed by SKS. The first is the degree of female empowerment.
I tried to run a word search in the SKS 2009-2010 Annual Report. The word was
‘Empowerment’ and the result was ‘no matches found’. All that SKS states is a desire to
‘empower the poor’. SKS aims to eradicate poverty by providing financial services to
poor women but does not make a mention about women and their empowerment. This
seems rather contradictory - if poor women are to act as agents of change in their own
communities and families the mission should involve economic, social, political and
spiritual empowerment within the individual.

40. 40
The second issue is that of the loan recovery method. We have seen that ‘manuals’ tend
to be silent if there is a situation where the field agent returns to the centre but the
payment is not made. Since it is exclusively the responsibility of the field agent for 100%
recovery of the loan, it is quite natural for them to exert pressure on centre and members
to save ‘their own necks.’ Normally, a field officer manages approximately 400-600
clients and should be given clear instructions as to how to handle a situation if there is a
repayment issue. But the loan the officer keeps silent regarding repayment issues as it
would drastically affect his performance and promotion prospects and tries to solve them
by himself at the centre.
The third issue is the wider one of the relationship of financial literacy to income
generation and the eradication of poverty. Though SKS insists on providing Compulsory
Group Training before inducting a new loan member into fold but much of the content of
this training is irrelevant and does not provide financial literacy to the members. The
training is rather a crash course on SKS’s financial products and how they are delivered
and recovered from the members. Imparting financial literacy should enable the loan
clients to better utilize the loan taken for income generating activities. Training should
concentrate on money management rather than money making. In a frenzied approach to
outreach its rivals and satisfy the financial sponsors, SKS loan officers overlooked loans
and their uses.
In trying to understand how these particular problems develop however we also need to
return to some of the basic issues raised at the start of this paper. The problem that this

41. 41
study poses is the extent to which a problem of mass poverty that can be argued to be
born of the system can be solved by a financial approach that arises with the system and
which may therefore be limited by it. This is partly a matter of the scale of poverty but
also because micro-finance organizations can reproduce the practices that have
undermined earlier approaches to dealing with mass poverty. With hindsight SKS
appeared to over-reach itself from the centre in the way that many more traditional
financial did. It also shared a similar culture in which success at the bottom depended on
what might be seen as the cultivation of a ‘sub-prime’ approach to lending where the real
risks were borne at the bottom.

42. 42
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Tabl
e 1.
Gro
up
Char
acter
istics
Dem
ande
d in
SKS
Micr
ofina
nce
mod
el
Group Characteristics Reason
1. Poor Non-Poor have other resources

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2. Close proximity of members
(approximately 300 meters from
one another)
Proximity
Facilitates communications
Ensures knowledge of each other’s repayment capacity
Ensures members personally know the reputation and
character of other members (Important in cases where
members have to help out with repayments)
3. No Close Relations in same
group:
- No 1st
generation daughters-in-
law/mother-in-law
- No 1st
generation sisters-in-laws
- No mothers/daughters/sisters
If members are not closely related:
Family issues/ problems do not come into the centre
Collusion among family members is prevented
Stops hierarchies of power that exist in the households
and ,among relatives functioning within the group.
4. Mutual Trust Members serve as guarantors for each other so trust is
necessary for group cohesion
5. Minimum of 3 members have
been or are currently home-
owners (or minimum of three
have an occupied home (kabja)
for at least five years]
Ensures creditworthiness of those in rented houses, as the
ones in owned houses are willing to cover repayments in
case of default.
6. Member is an adult no older
than 55 years
Ensures that the members are healthy and has the earning
power.

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Source: Handbook for Sangam Managers, 2008
Table 2 Percentage Share of Causes of Suicide in India in 2010
Cause %
Family problems 23.7
Illness 21.1
Love affairs 3.1
Drug Abuse 2.5
Poverty 2.3
Dowry dispute 2.3
Bankruptcy or sudden change in economic
status
2.0
Causes not known 16.9
Other causes 26.1
Source: National Crime Records Bureau, 2010.

56. 56
i
A mass of material exists on the performance of microfinance organisations in India. One of the main
secondary sources is the 2009 report ‘India Top 50 Microfinance Institutions’ by the Credit Rating
Information Services of India Limited. CRISIL has become a leading rating agency in India and it has
developed a unique methodology and scale called MICROS to assess an MFI. The Microcredit Submit
Campaign Report of 2011 which was originally convened by RESULTS Educational Fund in 1997 with the
aim of lifting poor families, especially poor women, out of the US $1.25 a day poverty threshold by 2015.
Its reports account for the largest and most comprehensive annual survey on the outreach of microfinance
activities. The findings from a national study of Indian Microfinance sector by the Small Industries
Development Bank of India is another major source. This longitudinal study was commissioned in 2001 by
the Small Industries Development Bank of India to assess microfinance products and delivery its study was
funded by the Department for International Development (DFID), UK and was supported by International
Fund for Agricultural Development, Rome.
ii
Data on SKS and its outreach in India has also been obtained from Mix Market (mixmarket.org). Mix
Market rates the MFIs on a scale of- one-through-five-diamond category. The rating is purely based on the
amount of and reliability of the data provided. Mix Market only includes only those MFIs whose scores fall
on four and five diamond category. Four and five diamond category institutions have financial statements
audited by a third-party firm and hence the data provided through the Mix Market are reliable and
comparable