A big gathering, mingling, free food, and prizes? This was much more exciting than what I had expected of a loan disbursal event at a microfinance institution (MFI). But after five months of living in rural India, such a crowd and fanfare actually felt quite normal.
Processes like this one clearly show the distinction between traditional finance and microfinance. Though they both accomplish the same major task, microfinance tailors itself better to the local customs and needs of its customers. So rather than a one-on-one serious meeting with a teller over a bank counter, I witnessed what looked at times like a social gathering of sorts.
Imagine a small house crowded with about 40 women, some sitting on the floor in one room, some on chairs in another room, a few toddlers (clearly dressed up for the occasion), and a few loan officers industriously giving instructions, and you have a GUARDIAN (Milaap’s partner) disbursal event at the Kulithalai branch office. At the event I witnessed recently, two batches like this attended – meaning around 80 women received loans. To make them comfortable, borrowers come with their groups, are fed tea and lunch.
Here's a picture of the smallest room in the office, crowded with curious borrowers.
By taking a look at GUARDIAN’s processes, we begin to understand how this institution is customized for rural population. When entering new areas, they send representatives to speak at village gatherings, such as panchayat meetings or government labor groups. Sometimes field staff even host their own event or go door-to-door. They talk about the consequences of poor sanitation, the proper way to build a toilet, and the opportunity to take a loan to do so. Rather than just providing economic opportunity, this organization educates and motivates communities to improve their overall health and environment.
The rest of the steps follow suit, with field staff coming to borrowers’ doors in order to personalize and simplify the process. After word spreads, interested individuals meet with a loan officer who assesses their household and financial situations. They fill out an application, which the loan committee must then approve. Finally, selected customers are invited to come to disbursal, which is the only occasion they must report to the office for. By going to the borrowers themselves, GUARDIAN serves women who work all day, have kids to look after, or who simply don’t know about financial opportunities.
At loan disbursal, all the women gather with their loan groups of four to five people. There are three important steps. At the first one, a staff member explains all the contingencies of the loan, catering to a population that may not be comfortably literate enough to read through the contract’s fine print. Next, a manager gives a brief, interactive lesson on proper sanitation and hygiene practices. Later they take a quiz on the material, and those who score highest win prizes! After a quick lunch break (yum, biryani!), loan officers help each group fill out the forms. Finally, everyone receives their cash and leaves smiling. If this were a party, the loans are the goody bags everyone was waiting for.
Here's a happy group that insisted we take a selfie:
The tone of GUARDIAN’s loan disbursal was far from private and serious as I had imagined. Instead of the highly ordered monochrome of a traditional bank, I observed commotion, colors, and chaos. Despite all the many things going on at once, their loan disbursal was quite effective. Despite the occasional time lags or confusion, that day, 80 women left the office with the hope of a better life.
After spending nearly six months here in rural Tamil Nadu, such fanfare as games and free food didn’t even surprise me. In such a bright and hectic place, it makes sense to blend in, in order to gain trust and form beautiful relationships with the local people.