Resolving inter-state water sharing disputes

N. SHANTHA MOHAN and SAILEN ROUTRAY

WATER does not respect any boundary. Most of the larger rivers in India meander through the administrative boundaries of the Indian federal system. Sometimes a river itself is the boundary: the Indravati forms the boundary between Maharashtra and Chhattisgarh for a part of its flow. Often rivers mark metaphorical boundaries as well: the Ganga is the vehicle to the heavens whereas the Vaitarani marks the crossing from this world of mortals to an infernal one. Therefore, in a fundamental sense, all rivers are transboundary.
But for our somewhat mundane discussion, it’s the wayward rivers that do not obey the diktats of human cartographic exercises that end up being marked and categorized as transboundary. For our purpose, we focus on rivers that arise in one province of India but end up in another. All of the longer and major rivers in India are transboundary rivers: the Mahanadi originates in Amarkantak in Chhattisgarh and crosses over into Orissa before finding its way to the Bay of Bengal; the Chambal rises near Mhow in Madhya Pradesh before meandering for more than 900 kilometres to the Yamuna in Uttar Pradesh, after having acquired the formidable reputation as a river of the badlands.
The Chambal is a telling example of a river, a large one with a length of around 960 km, that complicates the ways in which rivers in India are clubbed together and categorized. It arises in the central highlands and drains into the Yamuna which itself drains into the Ganga, thus forming part of a larger Gangetic river system. But it is difficult to locate it within the four-fold categorization of rivers of India into Himalayan, peninsular, inland and small coastal rivers flowing into the Arabian Sea.
The Ganga, Yamuna, Son, Gandak, Brahamaputra, Lohit and Teesta are examples of Himalayan rivers. A large part of the water that Himalayan rivers receive is from the snowmelt during summer and therefore perennial in nature. Most of the larger rivers in peninsular India are east flowing, apart from a few exceptions such as the Narmada and Tapti that drain into the Arabian Sea. The important east flowing rivers of peninsular India are the Subernarekha, Mahanadi, Brahmani, Godavari, Krishna, Cauvery and Pennar.
The Western Ghats form an important watershed for the southern part of the country. Apart from many of the east flowing rivers that rise here, many small and fast flowing rivers such as the Zuari, Mandovi, Netravati and Periyar originate in the ghats and after flowing fast over a short distance, drain into the Arabian Sea. Most of the other rivers in India are transboundary, be it a large river such as the Ganges or a relatively smaller one as the Penner. Rivers such as the Ghaggar and Luni do not find an outlet into the sea and lose their way in the desert wastes of Rajasthan and Gujarat.

The transboundary rivers have significant implications for water usage and policymaking, especially because while India has around 16% of the population and 2.45% of the land area of the world, it has only 4% of its water resources. In gross national terms the availability of water is comfortable. But this situation can easily change with increased demand due to changing patterns of economic growth and urbanization. Further, there is a large variation in terms of both spatial and temporal aspects. Spatially speaking with respect to water, the northern and eastern parts of the country are better endowed as compared to the western and southern. The less endowed regions with respect to water are located in arid parts in the states of Rajasthan, Gujarat, Maharashtra, Karnataka, Andhra Pradesh and Tamil Nadu that lie in one rain shadow region or the other.¹
India has a monsoonal climate and the average annual rainfall is 1,170 mm. It varies from less than 150 mm/year in northwestern Rajasthan to more than 10000 mm/year of rainfall in Meghalaya. A large part of the country, however, receives rain for only 100 hours in a year. More than half of the precipitation is received in rainfall of less than about 20 hours.² Therefore, the storing and subsequent usage of water is of utmost importance. It is this imperative to store water that creates potential for conflicts over transboundary rivers.

All rivers which flow across international and inter-state boundaries are a source of potential conflict. Fortunately, the experience around sharing of both international and inter-state transboundary river waters is not all that grim. The Indus Water Treaty between India and Pakistan that emerged out of a process of mediation facilitated by the World Bank is an important example of a working and ‘successful’ resolution of disputes surrounding an international trans-boundary river. The treaty which awarded nearly 80% of the water of the river system to Pakistan and 20% to India has survived three wars between the two countries. It can thus be safely described as a good example of successful transboundary water sharing in a politically volatile region.
The dispute between India and Bangladesh over the Ganges, especially the one surrounding the Farakka barrage, was addressed with the signing of a 30 year water sharing treaty in 1996. This was an important step towards figuring out mechanisms for sharing the waters of other transboundary rivers between the two countries on a mutually acceptable basis.³ And while tensions continue to episodically flare up, they have never reached the level of conflict.
Examples of successful dispute resolution of river waters related to India can be cited not only in the case of international rivers but with respect to inter-state transboundary rivers as well. These include rivers such as the Damodar, Gandak and Subarnarekha. Especially important is the example of a complex multi-basin and multipurpose project such as Parambikulam-Aliyar, where a joint water regulation board was established with members from the riparian states. However, it must be admitted that despite some
examples of successful and mutually beneficial water sharing, the potential for conflict remains.⁴ Rivers such as the Yamuna, Krishna and Cauvery have, for instance, been bitterly fought over.

The Yamuna is the largest tributary of the Ganga and an important source of water for irrigation and urban use in northern India. It drains the North Indian states of Uttar Pradesh, Himachal Pradesh, Haryana, Rajasthan and Delhi. The total present claims on the river add up to more than twice the total water available. In 1954, the waters of the rivers were shared between the states of Uttar Pradesh and undivided Punjab. Uttar Pradesh controls the eastern Yamuna canal whereas Haryana, as a successor state of undivided Punjab, controls the western Yamuna canal.
With increasing demand from the growing and urbanizing state of Delhi, this arrangement soon faced conflicts between Delhi, Haryana and Uttar Pradesh on sharing the waters of the Yamuna, especially during the lean summer months. Matters have often landed up in the courts, including the Supreme Court of India, through the public interest litigation route. With water demand continuing to grow in the basin states, especially in Delhi, the conflicts surrounding Yamuna waters see no signs of abating.⁵
In peninsular India, the Krishna has seen disputes over its waters as well. The second longest river in peninsular India, the Krishna drains the states of Maharashtra, Karnataka and Andhra Pradesh. After the reorganization of the states on a linguistic basis in the 1950s, the 25 year agreement on the Krishna waters signed in 1951 between Bombay, Hyderabad, Mysore and Madras states began to be questioned. The Krishna Dispute Tribunal headed by Justice Bachawat gave its award in 1976 with the states being asked to utilize their respective allocations by the year 2000. This in turn fuelled a frantic a race for utilization of water of the river between the various claimants.

A growing demand and attendant conflicts surrounding the river are exemplified in the problems between Andhra Pradesh and Karnataka over the Almatti dam in Karnataka. Any attempt by Karnataka to raise the height of the dam from its original height of 519 metres to 524.25 metres would have reduced the capacity of the Nagarjunasagar and Srisailam projects in Andhra Pradesh pushing the two states on a path of confrontation. But when Maharashtra, the upper riparian, tried to develop its water allocation, both Karnataka and Andhra joined hands to oppose such a move. We thus witness a complicated process of cooperation and confrontation depending upon contingent self-interest of the different parties. The concerned states routinely complain to the central government regarding water usage by other states, setting the stage for central mediation. With increasing intensity of resource utilization, such conflicts can only escalate as the Krishna river basin is one of the most over-utilized river basins in peninsular India.⁶
The Cauvery in peninsular India too has been a site of cooperation and conflict over a period of time. The regions of present day Tamil Nadu were the first movers in using the water of the river. In the era before the growth of modern dam-building technologies, the Cauvery was not dammed and its waters were only sparingly used in the upland areas of present day Karnataka. Attempts in the latter half of the 19th century by the then Mysore princely state to dam and use the waters of Cauvery river led to protests by the Madras Presidency and the beginning of negotiations between the two, eventually resulting in a treaty signed by the two relevant governments in 1892. This agreement, after placing on record the projects already taken up, stipulated that the Government of Mysore would not initiate any new projects and maintain the status quo.

So when Mysore proposed the construction of the Krishnaraja Sagar dam on the Cauvery, the Madras government challenged the decision of the arbitration committee, under the agreement of 1892. On receiving an adverse judgment from the committee, the Government of Madras took the matter to the Secretary of State in 1919 and managed a favourable response. Soon thereafter, negotiations started between the two governments and a 50 year agreement was reached in 1924, allowing for the construction of the Krishnaraja Sagar dam in the then Mysore state and the Mettur dam in Madras Presidency. It also provided a framework for the development of irrigation in the Cauvery basin.
This agreement was not renewed in 1974, at the end of its 50 year period. This 50 year period saw the intensification of irrigation development in both Karnataka and Tamil Nadu, the successor states of the princely state of Mysore and the Madras Presidency respectively. Increasing intensity of water use, especially for irrigation, led to conflicts. Tamil Nadu, that had enjoyed the first mover advantage with respect to irrigation development, now complained about the increasing use of water by Karnataka, the upper riparian. Tamil Nadu demanded the setting up of a tribunal for resolution of these disputes and sharing Cauvery waters. The Cauvery Water Disputes Tribunal was established in 1990 and gave its awards in 2007, unfortunately satisfying neither side.⁷

The history of inter-state transboundary river water sharing in India is thus characterized by both cooperation and conflict. Water conflicts are of many types depending upon the nature of the contesting parties and contestation involved. The issues pertaining to resolution of conflicts surrounding transboundary rivers are made especially complex because of a lack of adequate legal and institutional mechanisms. Take for instance irrigation, which as a sector consumes more than 80% of all available water in the country; it is listed under the state list in the Indian Constitution.
Entry 17 in the state list in the Constitution of India is important in this regard. It is subject to the provisions of entry 56 of the Union list which enables the central government to legislate on inter-state transboundary rivers. But entry 56 of the Union list is much underused. Article 262 of the Constitution provides a role for the Centre in adjudicating conflicts surrounding inter-state transboundary rivers. The Inter-State Water Disputes (ISWD) Act 1956 has been promulgated under article 262. This act provides for the formation of tribunals for settling such disputes.⁸

According to the provisions of the ISWD Act, a state government can approach the central government to set up a tribunal for adjudication of the dispute. The tribunal is headed by a chairperson with two other members, all three nominated by the Chief Justice of India. At the time of nomination, the chairperson and members have to be judges of the Supreme Court. The tribunal is empowered to appoint assessors to aid in investigation and provide advice in the proceedings. The act mandates that the award of the tribunal is to be published and that its decision is final and binding on the parties to the dispute.
The tribunals set up for settling the disputes surrounding the Krishna, Godavari and Narmada rivers are perceived to have been successful. Nevertheless, their efficacy to settle inter-state transboundary rivers is increasingly coming under question. There have been substantial problems surrounding the tribunals set up to settle the disputes surrounding the water of Ravi-Beas and Cauvery. The awards of both the tribunals failed to resolve the disputes and have led to greater bouts of intense politicking even though the tribunal’s award now has the status of a decree of the Supreme Court of India by virtue of recent amendments to the ISWD Act.
One problem is that the tribunals take time to reach a final settlement. Though the amended Act of 2002 mandates a time limit of six years, it still is a long period of time. In this context, mention must be made of several non-official civil society efforts to address the issue of river water sharing. The Madras Institute of Development Studies (MIDS), Chennai, initiated a process of creating a platform to facilitate dialogue between the farmers of Karnataka and Tamil Nadu in the Cauvery basin. Through the process of dialogue, farmers are developing a better understanding of each others problems and needs and thus reducing the potential for conflict.⁹

We now list some ways to help address issues of transboundary water conflicts. The first path is of an institutional nature. We suggest that a combination of existing institutions, such as the inter-state council, and the creation of new institutions such as river basin organizations, can go some distance in resolving water conflicts. We also need to use some new tools or old tools differently, to creatively deal with conflicts. In this regard, we look at mediation and an alternative approach to scenario building as two possible ways.
Article 263 of the Indian Constitution envisages establishing an Inter-State Council (ISC) with the mandate of enquiring into and advising upon disputes arising between the various states of India, to investigate subjects of common interest amongst the states, and to make recommendations upon such subjects for the better coordination of policy and action. The Inter-State Council was finally established by presidential order on 28 May 1990 as a recommendatory body to fulfil the already mentioned constitutional mandate.
The council comprises of the prime minister of India; chief ministers of all states; chief ministers of union territories; administrators of union territories; six ministers of cabinet rank in the union council of ministers and permanent invitees. Any matter in the Union list, Concurrent list or the state list of the Constitution of India in respect of which there exists a common interest as referred to in clause (a) of paragraph iv of the said order or a need for better coordination as referred to in clause (b) of the paragraph can be considered.
The council provides a forum for discussion on complex public policy and governance issues having a bearing on centre-state relations or with an inter-state dimensions. Because the council is a constitutionally mandated body, and has now built a wealth of experience in dealing with matters that are of common interest to states, it can play a useful role in facilitating dialogue and discussion towards resolving conflicts.¹⁰

There is a need to look at arbitration and negotiation as methods of conflict resolution. One institutional arrangement that can be used to facilitate negotiation surrounding interstate transboundary rivers is the River Basin Organization (RBO). RBOs can be set up under the River Boards Act of 1956 (RBA), legislated under article 56 of the Union list. These are empowered to regulate and develop inter-state rivers and their basins. The board must comprise of members with expertise in fields such as irrigation, water and soil conservation and finance.
But so far river boards have not been established in the country under the provisions of this act, in part because state governments fear that they will intrude upon their authority and power.¹¹ However, given the era of coalition politics, and an increased self-confidence of the states, there is need to take a fresh look at the possibility of setting up RBOs.
Till date seven tribunals have been established to deal with disputes surrounding the water of inter-state transboundary rivers. But they have not always helped resolve the disputes in a satisfactory manner. These tribunals depend upon the legal principle of arbitration. The awards of these tribunals, although supposedly final and binding, have been challenged in the courts. The judicial process is essentially an adversarial process and damages the relationship between the disputants.

In contrast, mediation is a process that employs a neutral person or persons to facilitate negotiations between the disputing parties so as to arrive at a mutually acceptable solution. Mediators should not have any direct interest in the conflict as they both control the process of mediation and its outcome. In actuality, it is the parties or disputants in whom the real power is vested. Mediation is a flexible and informal process and draws upon the multidisciplinary perspectives of the mediators.
In the South Asian context, the World Bank played the role of mediator between India and Pakistan, which resulted in a successful resolution of the conflicts surrounding the rivers of the Indus basin. In the Zambezi river dispute involving eleven countries, the Vatican mediated an agreement to use and manage the river waters jointly.¹² Thus, there is great merit in the proposal to deploy mediation as a tool for conflict resolution and participatory management.

The way scenario building in the water sector usually takes place, it is reduced to a ‘technical’ tool for prediction. Scenario building, however, is not a tool for projection and need not be used as one. It is essentially an imaginative exercise involving political and social choices; as much a tool for action as it is of thought. While undertaking an exercise in scenario building, one needs to take into account the physical qualities of water as a resource. Generally, in exercises of scenario building surrounding water, the current patterns of consumption are taken as a given, based on which various demand projections for future points of time are generated. Thus, this exercise is a projection of current patterns of demands into the future.
We argue that there is a need to look at scenario building completely differently. We need to hypothetically freeze the total available water, or the quantum at current levels of total consumption, for a given region or unit of analysis and build scenarios of alternative usage patterns. Instead of trying to predict the total quantum of water demand at a future date given certain conditions, one must plan as if water and its characteristics as a life-giving resource matter. This will necessarily be a non-technocratic and democratic exercise, since the simulation depends on the social choices that we might want to make if water availability and/or consumption were to be frozen at some arbitrary point in the present. Such an exercise will also help unravel the assumptions we make while making projections, as also help us radically interrogate theories of risk society by positing scenarios as ‘designs’.¹³

Water is increasingly an important site of contestation between states in India because of the rapid pace of economic growth, growing populations and increasing urbanization. The growing importance of forging coalition governments at the national level and the related assertion of regional identities add to the intractability of the problems. More often than not, such issues arise as a result of a focus on demand-side management. Many scholars have argued that supply-side management might be one way of dealing with such issues. While there is merit in this argument, we need to undertake institutional innovations as well.
The suggestion for setting up RBOs and providing a greater role for the inter-state council in dealing with inter-state transboundary rivers needs to be seen in this regard. Given the changing political dynamics in the country, it should not be difficult to convince the states that the relationship between state governments and the Centre need not be a zero-sum game. An increasing role for central institutions in dealing with issues emerging out of sharing the waters of transboundary rivers does not necessarily mean a whittling down of the powers of the states. Second, one needs to creatively use existing tools (such as mediation and scenario building exercises) for managing water resources of inter-state rivers more effectively and democratically.

Footnotes:
1. Ramaswamy Iyer, Water: Perspectives, Issues, Concerns. Sage Publications, New Delhi, Thousand Oaks and London, 2003.
2. Anil Agarwal, Sunita Narain and Srabani Sen (eds), The State of India’s Environment: The Citizen’s Fifth Report, Centre for Science and Environment, New Delhi, 1999.
3. N. Shantha Mohan, ‘Locating Transboundary Water Sharing in India’, in N. Shantha Mohan, Sailen Routray and N. Shashikumar (eds), River Water Sharing: Transboundary Conflict and Cooperation in India. Routledge, New Delhi, 2010, pp. 3-22.
4. Ibid.
5. A. Swain, Struggle Against the State: Social Network and Protest Mobilization in India. Ashgate, Farnham and Burlington, 2010.
6. Ibid.
7. S. Settar, ‘Kaveri in its Historical Setting’, in N. Shantha Mohan, Sailen Routray and N. Shashikumar (eds), River Water Sharing: Transboundary Conflict and Cooperation in India, Routledge, New Delhi, 2010, pp. 99-107.
8. N. Shantha Mohan, 2010, op cit.
9. Ibid.
10. Ramaswamy Iyer, ‘Inter-State Water Disputes Act 1956 Difficulties and Solutions’, Economic and Political Weekly 37(28), 2907-2910, 2002; and N. Shantha Mohan, 2010, op cit.
11. Ramaswamy Iyer, Towards Water Wisdom: Limits, Justice, Harmony. Sage Publications, New Delhi, 2007.
 

Women, micro-finance and peace

VINOD RAI

          

The most fundamental distinction between micro-finance and all other forms of conventional banking is that the core clients of micro-finance institutions are the self-employed and informal enterprises, clients that conventional banking has traditionally excluded. The magic of micro-finance is that it has developed techniques to lend to its members and their enterprises. These techniques are built around several key principles, which are widely known as core best practices in micro-finance:

1. Focus on motivating the borrower to repay through promise of continued access to credit, peer pressure and other collateral substitutes.

2. Approach of granting loan and determining the size of loan based on analysis of existing repayment capacity, or stepped lending.

3. Strong delinquency management systems, including immediate, personal follow-up, staff incentives, and management information systems.

It has been successfully proved that financial services can be effective and powerful instruments for poverty reduction by enhancing the ability of women to increase incomes, build assets, and reduce their vulnerability. At the core of the movement is a fundamental belief that access to financial services protects and empowers the poor by mitigating them from risks and giving them choices. The multiple role of financial services for the poor, parallel the multiple dimensions of the poverty captured in the Millennium Development Goals (MDGs). It is felt that impact of micro-finance is not only on poverty reduction but also on several other MDGs such as achieving universal education, promoting gender equality and women’s empowerment as well as reducing child mortality, improving maternal health and combating diseases.

In this background, it may be mentioned that the micro-finance movement has so far multiplied its lending to a sizeable scale. This signals an urgent need to explore and deploy new delivery mechanisms to complement existing structures and underlines the significance of institutional diversity. However, reaching significant scale will require moving beyond the NGOs model and tapping into selected large banking and financial institutions that have extensive distribution networks already in place, particularly in poorer regions.

With their large regional and national network, cooperatives are already a significant institutional channel for delivery of financial services to low income groups. Experiments with alternate delivery mechanism such as post offices, retail networks of fertilizer shops/agricultural implements, supermarkets, beverage suppliers, and petrol stations have already begun, and may offer additional prospects for reaching out to large numbers. In this connection, the concept of financial services for the poor will no longer be only dominated by microcredit. The types of financial services needed by the poor extend far beyond working capital loans, encompassing an array of savings, credit, insurance and money transfer services. Convenient, safe and secured deposit services are a particularly crucial need.

However, much depends on the extent to which government and other regulatory organizations can create an enabling framework for orderly growth of the micro-finance sector. Depending on their approach, regulators/supervisors can either undermine or encourage the development of micro-finance. The overarching goal of all stakeholders should be to support the development of financial systems that work for the poor. This approach requires that we remove the walls – real and imaginary – that separate a micro-finance community from the much broader world of financial systems, markets and development. It requires that we refuse to accept the status quo, in which it is considered normal for a country’s financial systems to serve only a tiny minority of its population, while the vast majority remains outside the systems.

However, a way out of the above situation is to strengthen the public and private financial intermediaries, particularly those engaged in lending to the unorganized sector. The governments should not get directly involved in providing financial services to the poor. Subsidized and inefficient lending programmes foster a culture of non-repayment on the part of clients and undermine good micro-finance institutions. It should not be encouraged.

As new solutions are found for the delivery of financial products and services to the poor and as these systems become more integrated in the overall financial systems, policy and legal frameworks will need to adapt so that governments can play their appropriate role as facilitators rather than direct providers of financial services for the poor. Our goal in this area should be to:

1. Foster diversity of institutions and financial products through the policy and legal regime that gives them equal treatment and is not biased in favour of one institutional model or product.

2. Establish supportive legal and regulatory frameworks that safeguard poor peoples’ money and promotes competition.

3. Develop the technical expertize of supervisory and regulatory authorities.

The need to regulate is being emphasized for the simple reason that the exposure to micro-finance has become very large. Many poor people have staked their family’s future on the credibility of the movement. Any failure or collapse will not only ruin families but also totally erode people’s confidence in the process. This will be very dangerous. Hence, to deter unscrupulous elements, it is essential that at a nascent stage itself, appropriate checks and balances are put in place.

In general, the government/regulators’ role in micro-finance should be to maintain or create an enabling environment that permits the growth of financial services for the poor and their integration in the broader economy. This can be done by addressing broad legal and regulatory constraints such as cumbersome registration processes, multiple laws, and suitable changes in various acts or framing an altogether new micro-finance act. There is a strong case for changing appropriate interest rate ceilings so that micro-lenders can cover their cost. Licensing rules needs to be adjusted so that financially solid instruments can fund their lending activities with deposits from the public. An important element of the regulatory strategy should be to create a regulatory framework that allows a wide array of financial intermediaries to serve the poor.

In a real case scenario it would be worthwhile to examine the model adopted by SEWA and how it works among women. The motivating factor behind the efforts of SEWA is to organize women workers to obtain full employment whereby they attain work security, income security, food security and minimal health and child care. Attaining such goals would mean that women become independent and self-reliant. Such economic self-reliance leads to independence in decision-making capability and thereby full empowerment.

Women in India have continued to be underprivileged in a large number of ways. The core advantage of the micro-finance movement is that those who are hitherto not entitled for assistance from formal banking channels, could avail the flexible loan products to meet their productive credit needs and timely assistance, even for certain family requirements. This has made an important social contribution.

SEWA has the advantage of its own Shri Mahila Sewa Sahakari Bank. The experience of this cooperative bank is that women who were earlier paying a daily interest of 10%, are now able to make a sizeable earning even at 17-18% rate of interest charged by the bank. The banksathis, as the frontline workers are called, are the strongest link in the chain as they belong to the same community and neighbourhood of the borrowers they assist. The sathi has a certain credibility by already owning a bank account and is also educated. A second link is one between the sathi and bank facilitator.

There is thus a strong bond between the bank, its two facilitators and the women clientele. The cornerstone of such a strong movement, which must have long-term sustainability, is the confidence generated among these elements. The client must feel that the bank and the facilitators empathize with them. Through peer pressure and positive encouragement, the banksathi must inculcate in the mind of the woman borrower the fact that timely repayment of loans enhance her borrowing capacity and thereby provides greater opportunities for increasing business and returns.

It has been a long time serious concern to find successful models which are flexible in their approach towards the requirements of the poor. Central to this is the need for timely resources in the hands of the poor to help them reduce the burden of debt. Policy-makers have been applying themselves to this cause but have not yet been able to find the foolproof delivery system to bridge the credit gap. Ad hoc measures such as loan waivers and interest subsidy do not solve the problem to provide sustainability to people living below the poverty line.

The formal banking mechanism has not provided succour. Direct lending of priority sector sub-targets have also not got to the root of the problem. It was in this context that micro-finance has offered financial services to the poor in a sustainable manner, albeit at higher rates of interest. The remarkable experience in this sector has been the fact that despite the prevalence of relatively high interest rates, the borrowers have consistently been able to retire their debt and enhance their borrowing power.

Another offshoot of this model viz., the SHG-bank linkage programme, has been a remarkable success as it has provided banking at the doorstep, improved their capacity and also ensured peer pressure as a motivation for the borrowers to return loans. Today micro-finance stands as a movement which has helped reduce the incidence of poverty by providing the poor with resources at their doorstep. It has enabled them to channelize spending on education and health care. Child mortality has gone down, school dropout rates have reduced and dependence of households on informal moneylenders has been substantially lowered.

The overall experience of the SHG-bank linkage programme and the setting up of micro-finance institutions has debunked the myth that the poor are chronic defaulters and, therefore, not bankable. Due to collective decision-making and having strength in numbers, the poor, organized in the SHGs, have linked up with mainstream financial institutions. Banks have had a pleasant experience as SHG portfolios have much lower NPAs than many formal borrowers. Since this linkage programme has outreached through an existing structure, the cost has been minimized and a parallel set-up not necessitated.

The main ingredient to the success of the programme has been the fact that the poor and quite often those located in rural areas, have to deal with people of their own community to access funds. In some ways approaching a formal bank branch is psychologically intimidating. This barrier has been overcome through the SHG collectively linking with a bank. To ensure the further success of the movement and thereby providing it sustainability in the long run, MFIs must develop strategies for increasing the range and volume of their financial services to ensure that they price credit at cheaper rates. Government and other private institutions must come forward to separately meet the equity requirements of MFIs so that the debt-equity ratios can be reduced. However, care needs to be taken to ensure that MFIs do not over-leverage themselves and remain within prudential borrowing limits.

I sincerely believe that the poor have the desire and capability to repay. Women among the poor have even a greater willingness, as they see in the movement an opportunity of ending their exploitation and attaining empowerment. By nature, women have closer bonds with their children and given the basic economic necessities, would like to provide the protective umbrella of nutrition, education and basic health care. Their economic independence also ensures that they can withstand the challenge of exploitation once they have the confidence to be able to withstand oppression due to their new-found economic independence. They will resist any attempt at social oppression, family exploitation and the ability to suffer in silence.

Seeing such core strength, the society and in particular the male dominated community, will see a deterrence in the further exploitation of women. Such deterrence leads to a more harmonious family existence and a more cohesive community, thereby bringing about peaceful coexistence. If benefits of women’s empowerment, economic independence and their upliftment have to take place, it is micro-finance linked self-help groups which will bring about the revolution. I have great confidence that a strengthening of this movement will improve the bargaining power of women within the family and in society. The initiatives and support provided by SEWA in this direction are remarkable and need to be replicated in all parts of the country.

WOMEN comprise a sizeable proportion of the world’s poor. Traditionally, they have been marginalized. They face disproportionate gender specific barriers. Women in India seem to earn less than men, have lower levels of literacy skills and face higher levels of physical vulnerability. They have also the responsibility of taking care of their families. They face social and economic discrimination and have little access to credit. Lack of access to credit by women poses an enormous challenge in addressing such inequalities.

Micro-finance is a powerful and effective instrument for poverty alleviation and women’s empowerment. Access to credit gives women an opportunity to overcome exploitation and become self-sufficient. Micro-credit programmes play a crucial role in improving their skills, income and self-esteem. Women are better borrowers, wiser spenders and are more trustworthy. However, women have specific financial needs. Therefore, they need products which are sensitive to their requirements. Innovative, tailor-made credit programmes specially designed for women have a lasting impact on women in developing countries. Micro-finance has not only improved the economic well-being of women in India, but also empowered them. I sincerely believe that economically empowered women in society introduce elements of peace in the community in which they reside. And hence the importance that we attach to this movement and the contribution of institutions such as SEWA.