CREDIT CONNECTIONS Meeting the Infrastructure ., 'Needs of the Informal UNDP- Sector throughAi ;vofin;b. World Bank t . {in,.Urban, I,ndia. .,,[24868 uFI,.Iii - .July 1999 South AsiRegion. ' This reportdescribes-. . 4 . the 'Action Research`-j:.........8 s >;--. . component-of the study on 'Meeting. InfrostrudctureNeeds of r the Informal Sector , through Micro finance in Urban, In'dia'.' The Action Research. compionent was' designed tdocomplement - the four cos,e"tt4dies'of<..'.'.' $, ,;2 existing micr6ofinnce . institutions providing _-s --rdtforow,ater s'upply ' ~p, ' ,\{ ,. s and sanitation to poor women in the informal `i' ,' sector and to explore,the . . -\ -' proctical requirements of t, microcredit for infrostructure. Action -, Research wa's carried ' '.- out between December I 1998 and April 1999. Guijarat Mahila Hoiising SEWA Trust .0 ., VF1.E.O.7 Action Research: Introduction 3 Action Research: Phasel 5 Action Research: Phase II 15 Proposed Loan Process Maps 16 Proposed Housing and Infrastructure Loan System 18 Annexures I to VI 20 A~ ~ . .... The main objective of the-Action Research was'to:- Develop a prototype housing and infrastructure finance department model with appropriate accounting, reporting and loan evaluation systems for-financial institutions disbursing credit to poor women in the urban informal sector in India. The Action Research was undertaken in two 'phases. Phase I of the Action Research component of this initiative was undertaken by working in partnership with SEWA Bank, Ahmedabad. Phase II-involved the development of the prototype model, based on the findings of Phase 1. The methodology and findings of the. Action Research should-provide useful pointers to microfinance;'institutions around the country, on how to approach the establishment of specialized infrastructure and housing services. Rationale for the 1 00 percent maintenance costs) infrastructure loans are a new, Action Research have shown high success rates in emerging sector coupled with the providing improved infrastructure extremely high field-level demand There are a growing number of to poor consumers. Four examples for such loan types, grassroots emerging microfinance institutions of such success stories are institutions are often unable to in urban India that are facilitating documented in the Field Notes cope with the growth in the sector. poor communities to access attached. Housing and infrastructure loans improved shelter and services Field-level interviews have are characterized by longer through the provision of small- clearly demonstrated that demand repayment terms and are usually scale credit. These include credit to for credit is very high amongst the of a relatively higher volume, as pay for water connections, informal sector poor. With compared to income generation or handpumps, electricity increasing demand at the consumption loans. This connections, construct toilets and grassroots for better shelter and necessitates access to bulk re- upgrade homes. Interestingly, services, small-scale loans finance from mainstream finance microfinance institutions are accessed from microfinance institutions for on-lending. increasingly emerging in new institutions are an effective Traditional collateral such as land partnerships involving facilitating tool. However, title deeds are also largely municipalities, poor communities microfinance institutions face a unavailable within the informal and various other partners such as variety of institutional problems in sector, due to lack of legal land non-governmental organizations accessing adequate funds for on- tenure. and donor agencies involved in lending to poor communities. Despite these distinguishing slum upgradation projects. Loans Some of these are highlighted in characteristics, most microfinance for community or individual on-site the Issues Paper which is also institutions have not yet developed infrastructure purposes are a fairly enclosed. a specialized system for housing new area in India. Pilot projects Besides the existing problems in and infrastructure loans. They involving community participation accessing adequate funds, have mostly been administered via along with an element of the microfinance institutions also face the same systems that are consumer's own cash contribution another major difficulty. Due to the applicable to other loan types. (proportion of capital costs and fact that shelter-related and Given the specific characteristics of 3 .,.,.g- - n - s t - 4 . 4o W^G -Es his ongment, as well%as the The results of such-a survey mnay Phase II: Design of ' growing size of the sector, it was be used in designing an Prototype Mousing and deemed useful to develop a appropriate, demand-responsive infrastructure Loan prototype housing and loaning system and to develop Department infrastructure loan department as appropriate loan products with Following an analysis of the an Action Research component to realistic terms and conditions results of the market survey, a this study. attached. specialized housing and Accordingly, a Needs infrastructure loan department Methodology Assessment Study on the for financing institutions 'Housing Finance Needs of supplying credit to women in The Action Research initiative Women in the Informal Sector, the urban informal sector was conducted in two phases: Ahmedabad City' was undertaken was developed. with the cooperation of SEWA Full documentation of the new Phase I: Housing Finance Bank. Full details of the Study system, job responsibilities of the Needs Assessment Survey along with an analysis of the main related personnel and copies of Prior to tackling the main findings are elaborated upon in the various forms to be used within objective of designing a the section entitled 'Action the loaning system are detailed in specialized system for housing Research: Phase 1'. the following section entitled and infrastructure loans, a market Microfinance institutions wishing 'Action Research: Phase 11'. survey to clearly understand the to carry out similar studies in other This model has been developed housing and infrastructure loan cities may find the methodology along with full documentation so market that exists among the and format of the survey a useful that it may be pre-tested, refined target clientele of the micro- guide. and eventually replicated by financing institution is required. microfinance institutions. 4 I -4.'~~ ,Needs Assessment Study of the Housing and Infrastructure Finance Needs of Women in the Informal Sector, Ahmedabad Introduction Research Team women had previously taken housing, infrastructure or income This section of the report The research study including generation loans from SEWA Bank, describes Phase I of the Action preparation of the questionnaire for amounts varying from Research: a market survey of the and analysis of data was Rs 5,000 to Rs 1 0,000. Thirty housing and infrastructure coordinated by Smita Ghatate, women sampled were from three finance needs of poor women in Consultant, SEWA Bank, specific areas of Ahmedabad, the informal sector. The survey Ahmedabad. namely Sanjay Nagar, Sinheshwari was designed and completed with The field work was undertaken Nagar and Meldi Nagar. All three the help of SEWA Bank, and coordinated by the field areas are participants of the Slum Ahmedobad. workers of SEWA Bank. Networking or Parivartan The study took four months for Program1. Thirty women residing Objectives completion, ending in March in the same localities as the 1999. Board of Directors of SEWA Bank, * To assess the housing and but yet to open accounts at the infrastructure finance needs of Use of Pre-tested Bank, were also selected for the poor women in the informal sector Questionnaire survey. in Ahmedabad city. Issues such as the specific purpose of taking A structured questionnaire was Findings of the Survey housing or infrastructure loans, prepared and pre-tested at the the desired loan repayment field level. Necessary modifications This section contains relevant period and whether the cost of were made before the final survey tables and related analysis, credit is more important or access was undertaken. In addition, summarizing the findings of the to credit is more important to field-level informal interviews survey. The findings are organized women in the informal sector, will with the respondents were also under five main categories: be addressed. carried out. 1. General Information * To provide information to SEWA Annexure 1 contains a 2. Current Housing and Bank, on the potential market that reproduction of the questionnaire Infrastructure Status exists for housing and used for the survey. 3. Housing and Infrastructure infrastructure loans within Loan Details its target and existing loan Sample Base 4. Unmet Housing and clientele. Infrastructure Needs * To specifically examine the In order to get a reasonable 5. The Effect of Housing and effect of housing and infrastructure sample base, 1 50 respondents Infrastructure Loans on the loans on the income levels of were interviewed for the needs Productivity of Home-based home-based workers. assessment study. Of these, 90 Workers 'The ongoing Ahmedabad Parivartan Program brings basic infrastructure services to the slums of Ahmedabad for on-site upgradation, in an affordable and sustainable way. The delivery and cost sharing mechanism is through a unique public- private-community partnership. For more details, refer to the publication entitled Ahmedabad Parivartan, UNDP-World Bank and Sanitation Program - South Asia,1 999. 5 a4- Findsngs of tle Survey 1. General Information Main Occupation of Respondents Main Oscupation No. of Respondenht % of Respondents Vendor2 40 27 Home-based worker' 50 33 Labor and services4 30 20 Housewife5 12 8 Others 18 12 Total 150 100 Distribution of Respondents liy Individual Monthly Income Indhviddal Monthly No. of income (Rs) Respondents % of Respondents 0 10 7 <300 5 3 301 -600 28 19 601-900 22 15 901-1,100 30 20 1,101-1;300 12 8 1,301-1,500 20 13 1,501-1,700 01 1 1,701-1,900 01 1 >1,901 21 13 Total 150 100 Distribsti ilho-Respondentsiby -Monthly Household income Monthly Household- No. of Income (Rs) Respondents % of Respondents <500 1 1 501-1,000 6 4 2Vendors include door-to- 1,001-1,500 12 8 door saleswomen as well 1,501-2,000 26 18 as stationary vendors 2,001-2,500 171 7 (based in marketplace) of 3,001-3,500 20 13 vegetables, fruits, fish, etc. >3,501 57 38 3Includes bidi rollers, Total 160 100 agarbatti makers, crafts workers, papad rollers, etc. ~~~~~~-- of 4l~~~~~~~~~~~~~~'ncludes maidservants, Distribsution of lRespondents by Number of Persons41cuemadrvns Respo ndents Number;ofPersos ragpickers, construction Living in Household workers and other No. of Persons No. of Respondents % of Respondents daily wagers. 1-2 5 3 520 percent of respondents 3-4 37 25 included non-clients of 5-6 50 33 SEWA Bank. All the 7-8 41 28 housewives interviewed Total 170 100 belonged to this sample sub-section. 6 LE ~~ l - Du 1 S 9vi s | 1a~~~V. ,~~~~~~~~~~~~, - Et Analysis: General are either door-to-door vendors (84 percent) earn Rs 1,500 per Information within designated areas, or month or less. In 88 percent of stationary vendors based in a cases, the total household income One-third of the women particular marketplace. is between Rs 1,500-3,500 per surveyed are home-based workers Providers of labor and services, month. This suggests that most of for whom their home is also their including domestic servants, daily the women interviewed are workplace and warehouse. wagers and construction workers, substantial contributors to their Particularly for these women, make up the third category of total family income, generating access to infrastructure, including occupation amongst the women between 45-100 percent of the water and electricity is very interviewed (20 percent). monthly family earnings through important as they are often Ninety-two percent of the their individual efforts. primary factors of production. women interviewed were engaged The average household size is Vendors are another common in income generation activities in five to six persons (33 percent of category, comprising 27 percent of the informal sector. Eight percent the families). In relation to their the women interviewed. These were housewives. None of those in total monthly household income, women vend a variety of products the housewife category were clients nearly 1 00 percent of the -including fruits, vegetables, of SEWA Bank. respondents are living below the cooked food products, etc. They The majority of the women poverty line6. 6According to the Planning Commission of India, the all-India urban poverty line for 1996-97 is defined as those with a monthly per capita income of Rs 353.44 or less. This figure is calculated on the basis of daily calorific requirements along with an added percentage for 'other needs' and updated annually in line with inflation. The latest update was undertaken in 1996-97. 7 iFnngs of the Survey 11 Current Housing Status Distribution of Respondents by Area Distribution of Respondents by Type in which Current House is Located of Current House Construction Type of House No. of % of Type of Current Ne. of % of Respondents Respondents House Construction Respondents Respondents Society7 13 9 Kuchcha'" 45 30 ChawP8 76 51 Semi-pucca'2 64 43 Chhapura9 35 23 Pucca"3 41 27 Others'° 26 17 Total IS0 100 Total 150 100 - ------ - ------------ Distribution of Respondents by House Ownership Details Number of Rooms in Current Shelter15 Details No. of % of Respondents- Respondents No. of Rooms No. of % of Ownership with clear title 37 25 Respondents Respondents Informal ownership'4 74 49 1 112 74 Rented house 39 26 2 25 17 Total 150 100 3 10 7 >4 3 2 Total 150 100 Number of Respondents whose Distribution of Respondents by Houses have Special Purpose Spaces Existing Infrastructure Facilities in (includes covered and uncovered spaces) Current Shelter Type of Space No. of % of Type of Infrastructure No. of % of Respondents Respondents Respondents Respondents Seporate kitchen 54 36 Own bathroom 62 41 Open space 8 5 Own toilet 83 55 Workshed 6 4 Own water connection 107 71 Storage room 5 3 Own sewer connection 122 81 Not applicable 87 58 Internal electricity in home 126 84 7Society: Regular colony containing full, individual infrastructure facilities. 8Chowl: Slum containing kuchcha or semi-pucca houses, with limited individual and some collective infrastructure facilities. 9Chhapura: Slum containing only kuchcha houses with very basic, collective infrastructure facilities. '°Others include staff quarters, mohalla etc. "Kuchcha: Mud walls and floor with thatch/tiled roof. 2Semi-pucca: Mud and brick walls and floor, with asbestos/tiled roof. '3Pucca: Bricks and concrete; sometimes with asbestos roof. "Informal ownership refers to settlers squatting on government owned land for 1 0 to 15 years (or beyond); they do not possess any legal land ownership documents. '5Covered toilet and covered kitchen are each considered to be separate rooms. 8 C ur CurrEn h - Housing Status - they had beenliving in the same connected to the main city house for 1 0 to 1 5 years (and sewerage network but have built The base-line survey found beyond). Most of the land was their own toilets, the majority have 75 percent of the respondents either government or privately built twin-pit pour-flush latrines. currently living in kuchcha or semi- owned open spaces, on which In terms of infrastructure, pucca one-roomed houses, migrant workers had built their approximately 71 percent have located in slums. A total of homes. their own water connection. 34 percent of the women surveyed Twenty-six percent of the However, they only have access to have a separate kitchen. Only women surveyed lived in rented two hours of water flow per day, as 9 percent of the respondents accommodations, although all it is released from the Corporation reported that they lived in a wished to have a home of their at designated times. Although 'formal' society or a colony. It is own in the future. 81 percent have sewer interesting to observe that all of Lack of space is a very real connections to their home, only these women were residents of problem, as is evident from the 55 percent have built their own San jay Nagar or Sinheshwari fact that besides a basic room, toilets. Lack of space, money, Nagar, where the Parivartan 58 percent of the respondents do adequate water for operating a Program has been completed. not have any other 'special toilet or technical know-how is With the provision of purpose' spaces, such as a kitchen, responsible for the fact that all comprehensive infrastructural shed or any open space to work in. those with sewer connections have facilities, residents now feel that Forty-one percent had their own not been able to construct their they are no longer living in a slum, bathroom, while 55 percent own toilets as yet. A significant but in a regularized 'society'. reported that they had access to proportion of respondents Only 27 percent of residents their own toilet. Those that had (84 percent) have electricity have pucca, two- to three-roomed their own sewer connection to the connected to their house, although houses. city mains (majority of slums have the majority of these connections Half the families surveyed did these), have built pour-flush model are illegal due to lack of land not possess any clear land (water-borne system) toilets. Of tenure. ..,1 1 w e;; .,-- 1 j, ,_ ias.%jXF.b -1-1 > 2 * Q~~~~ ;jJ ' i t v | 1~~~I 9~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I Findings of the Survey Ill. Housing and Infrastructure Loan Details Distribution of Respondents Aware Source of Awareness about Housing of SEWA Bank's Housing and and Infrastructure Loans Available Infrastructure Loans from SEWA Bank Aware of Housing and Ne. of % of Source No. of % of Infrastructure Loans Respondents Respondents Respondents Respondents Yes 131 87 Employees of SEWA Union 36 24 No 19 13 Employees of SEWA Bank 42 28 Total 150 100 SEWA Bank Board of Directors 30 20 Members of SEWA Union 23 15 Not aware of SEWA Bank loans 19 13 Total 1SO 100 Distribution of Respondents by Distribution of First Loans from Total Number of Loans taken from SEWA Bank by Purpose SEWA Bank Purpose of No. of % of Total Number No. of % of Loan Respondents Respondents of Loans Respondents Respondents Housing or infrastructure 60 40 0 31 21 Working capital for own 1 48 32 business 38 25 2 35 23 To buy equipment for own 3 14 9 business 13 9 4 7 5 Consumption loan 8 5 > 4 15 10 No loan 31 21 Total 150 100 Total 1SO 100 Comparison of First Loans by Amount Requested and Amount Sanctioned Loan Amount No. of No. of Loans Effect of First Loans (Rs) Respondents Sandioned on Increased Earnings Less than 5,000 40 71 5,001 -10,000 31 33 Increased Earnings after No.of % of 1,001-15,600 6 4 Taking First Loan Respondenht Respondents 15,001-20,000 7 1 Yes 50 33 20,001 -25,000 23 10 No 69 46 More than 25,001 12 0 No loon 31 21 No loan 31 0 Total 150 100 Total 150 119 16 It was difficult to obtain accurate Sources of Additional Funds to Supplement First answers, as many respondents found Loan and Rate of Interest Paidly it hard to remember and quantify whether the first loan they had taken Sources of No. of Monthly Rate of from SEWA Bank, had led to Additional Funds Respondents .Interest Paid (%) increased earnings for them. 0 1 1.5 2 2.5 3 3.5 4 >4 7Only 30 of 150 respondents sought Own savings 4 4 additional funds to supplement their Moneylenders 4 1 2 1 first loon from SEWA Bank 100 Friends/relatives 19 10 1 2 4 2 f Others 3 1 1 1 percent of them had taken loans Total 30 15 1 1 2 5 2 4 for house/infrastructure upgradation/repair. 10 Anailsis - Housin scala credit, their experencis L£ On the other and in lin ewith and Infristructure that first loans are usually prudential lending norms, SEWA Loan Details demanded for consumption or Bank assessed each applicant's income generation activities. SEWA loan repayment capacity and the The majority (87 percent) of Bank's increasing track record of majority of first loans sanctioned women surveyed are aware that facing very high demand for were only up to Rs 1 0,000. The SEWA Bank disburses housing and infrastructure and/or housing maximum first loan amount was infrastructure loans. The most loans as the first loan, Rs 25,000 - only 8 percent of common sources of information for demonstrates a shift in the women interviewed were community groups about SEWA priorities of poor communities. sanctioned the maximum Bank's loans are employees of Access to better housing and available. SEWA and SEWA members infrastructure through own The women surveyed were themselves. contribution (facilitated by housing asked to provide details of any There is a well-proportioned and infrastructure-related credit) additional funds taken from spread among the women is a fast-growing market for external sources to supplement interviewed, of those who have SEWA Bank. their first loan amount. This served taken no loans (21 percent), to Fifty of the women interviewed as a benchmark for SEWA Bank to those who have taken more than (33 percent) said that they had understand the main sources of four loans from SEWA Bank experienced an increase in funding besides itself, available to (10 percent). Fifty-five percent of earning levels following utilization its members. Only 30 women, that the latter are long-term account of their first loan. These 50 women is 25 percent of the women who holders with SEWA Bank who were all of the home-based had taken a loan from SEWA have been customers for over workers included in the survey. Bank, had found the amount 15 years. The majority of the Thus, this survey conclusively sanctioned inadequate and had to women interviewed, however, had proves that housing and supplement it from external taken either one or two loans from infrastructure is a productive asset sources. Of these, 63 percent SEWA Bank. and that there is a 100 percent reported that relatives or friends More than half the first loans correlation between increased had provided them with additional taken from SEWA Bank by the facilities or better housing and a loans, while 1 3 percent used their women interviewed were for rise in income levels. own savings. Half of the loans housing or infrastructure More than half the women from relatives or friends were upgradation purposes. The (60 percent) wanted amounts interest-free, but the other half accuracy of this statistic is ranging from Rs 2,000-10,000 for had to pay interest rates of reinforced by the fact that over their first loan. This reinforces the between 24 to 48 percent per 52 percent of SEWA Bank's totol belief that there is a substantial annum. Thirteen percent also loans are disbursed for housing or demand for small-scale credit (up resorted to borrowing from . infrastructure-related needs. Only to Rs 10,000), as people moneylenders in order to complete 7 percent of first loans were for themselves are responsible the job for which the loan was consumption purposes, applied for enough to assess their own originally taken. This is significant in times of crisis such as death, repayment capacity limitations. as loans from money lenders carry illness or marriage. The balance Especially amongst the older a range of interest of between 43 percent of all first loans were members of SEWA Union included 36-48 percent per annum - taken for income generation or in the survey, a total of 35 percent much higher than the current asset creation. of the women surveyed demanded market interest rate ranging from Historically, when microfinance Rs 1 5,000-25,000 for their 17 percent (SEWA Bank) to institutions begin disbursing small- first loan. 20 percent. 11 ;n. of the Survey IV. Unmet Housing and Infrastructure Needs Interest Rate at which Respondents No. of Respondents who Want Future are Willing to Borrow Housing or Infrastruture Loans Annuda Interest Ne. of % of Want Future Ne. of % of Rate Respondents Respondenht Lean Respondents Respondents 12% 60 40 Yes 138 92 18% 85 56 No 12 8 30% 1 1 Total 150 100 No response 4 3 Total 150 100 I Ui,t~Ni~s.~ Dlst.ib ion - , Distribution of Respondents by Unm-eiit Wiided' Distribiution' of Future Infrastfructure Needs In Resp'onde'nts Purpose of Future Current House'" Housing or In'frastructure Loanis Infrasruture No.of %of Purpose No. of % of Needs Respondents Respondents Respondents Respondents Bathroom . 86 57 Repair walls 51 34 Toilet 52 35 Repair rf 2 43 Woter connection 29 19 Repair roof 24 Ir0 Repair floor 41 27 Sewer connection 22 15 Add room 37 25 Electricity connection 24 16 Build terrace 44 29 Add bathroom 52 35 Add toilet 30 20 water connection 06 4 sewer connection 06 4 Analysis - Unmet/Future Housing and Sewer connection 05 3 Connection for home eledricity 03 2 Infrastructure Needs Build/buy new house 25 17 The unmet needs for housing and infrastructure finance among the women interviewed were assessed by asking respondents whether they wanted housing and/or infrastructure-related loans from SEWA Bank Distribution of Res'pondenti by Loan AmoiEbuntio Required te,spoqeents F e Lin the near future. If so, they were asked the specific Amount Required to Meet Futurem Housing and Infrastructure Needs purpose of the loan and acceptable interest rates that -ean Amount No. of % of they would be willing to pay for credit. -Loan Amoeunt No.eof % of (Rs) Respondents Respondents An overwhelming 92 percent of the women stated 0-5,000 12 8 that they had demand for future housing or 5,00;-10,000 3 3 infrastructure-related loans. Nearly all of them 10,001-15,000 3 2 15,001-20,000 11 7 (96 percent) expressed a willingness to pay interest 20,001-25,000 22 15 rates of between 12-18 percent per year which is a >25,000 97 65 Totul 150 100 realistic demand in line with market rates of interest. This confirms that the poor are not demanding highly subsidized credit, a common misconception. The women surveyed reported that they were fully aware "Multiple responses arising from multiple unmet needs. that it was unsustainable for an institution like SEWA 19Multiple responses arising from multiple future needs. Bank to provide loans at cheaper than market rates. 12 D"OJ~~~~~~~~~~~~~~~~~ -\; - ~They als~ gave a hightr priori to-- womnen by.designi*g specific;water .majority of women (87 percent access to timely and efficient credit supply and sanitotion loan reported higher amounts ranging rather. than focusing on the products. In addition, a technical from Rs 15,000 to over absolute cost of credit, as long as agency such as Mahila Housing Rs 25,000. A substantial 65 the cost was reasonable. SEWA Trust would have to play the percent of the women stated they Most agreed that in comparison intermediary role of engaging the needed over Rs 25,000 in loans to to other sources of credit (mainly municipality to facilitate the water satisfy their unmet housing and moneylenders), the interest rate supply and sanitation provision, infrastructure-related needs. Of charged by SEWA Bank was fair upon payment by the consumer. course, they did not wish to access and reasonable. When asked the amount of one loan for such a large amount, The specific unmet housing and credit they required in order to but several smaller loans in future, infrastructure needs of the women meet future housing or to meet their composite shelter- interviewed covered a wide range, infrastructure-related needs, the related needs. including various aspects of house repair - walls, roof, floor (50 percent) and house additions Findings of the Survey consisting of room and terrace (54 percent). Infrastructure V. The Effect of Housing and Infrastructure Loans upgradation loans - including the on the Productivity of Home-based Workers addition of a toilet, bathroom, - --- water, electricity and sewer I Number of Respondents who Use connections - were demanded by their Home as a Workplace a substantial number of Use their Home No. of % of respondents. This again highlights as Workpleee R n R n Yes 50 33 the significant level of demand for No 100 67 infrastructure-related loans, which Total 150 100 is a relatively new phenomenon. Only 25 of the women surveyed DistrIIulo o rt of Home Used reported that they wished to take as Workplaco loans in the future from SEWA Part of Heme No. of % of Bank to buy or build a new house. Respondents Respondents When specifically questioned Room 30 60 Kitchen 7 14 about their future infrastructure Open space near house 8 16 needs, a majority of the women Workshed 2 4 Storage room 1 2 expressed a need for water- and Others 2 4 sanitation-related services Total S0 100 including building a bathroom, toilet, water and sewer _ connections. Only 16 percent reported that their main need was Workers that have Taken a * . . i~~~~~ Housin or Ifstrudure Loan to get their own electricity from SEWA Lan from SEWIA Bank connection. This also serves to Taken Housing or No. of % of highlight that the water supply and Infrestructure Loan Respondents Respondents sanitation sector is highest in Yes 31 62 people's priorities. As such, SEWA Toal 50 13080 Bank could significantly help these 13 M ¢ F - ~ r _ I < _ _r;- ' L Amount of Increaise in Monthly Income following Receipt of Housing or Infrastructure Loan' Increase In Monthly No. of % of Income (Rs) Respondents Respondents 0-100 14 28 101-200 9 18 201-300 10 20 > 301 17 34 .-, Total 50 100 I' - . ' 7 Distribution of Home-based 1' - Workers that Want to Take Future -'- - * Housing or Infrastructure Loans from SEWA Bank Need Future Home Upgradatlon or No. of % of Infrastructure Loan Respondents Respondents Yes 47 94 1 - No 3 6 Total 50 100 Analysis - The Effect of Housing and AC 9 v - _ ; +j- Infrastructure Loans on Productivity -l ._ - - ~i * of Home-based Workers This special section of the survey focused on - studying the impact of housing and infrastructure I . 5A --- - (33 percent) women who were home-based workers. Sixty percent of them used their room (75 percent of total women surveyed lived in one-roomed shelters) as their workplace - in addition to it being their living IL i 1. - \ and sleeping space, kitchen and storage room. Over half (62 percent) of the home-based workers '1 IV \ v g g , tu usurveyed had taken a housing or infrastructure loan < > g g from SEWA Bank. Significantly, all of them saw a rise '2 in their monthly income following shelter or IFa -" _ infrastructure-related upgradation, in the range of Rs 1 00 to over Rs 300 per month. An overwhelming 94 percent said that they had need for future home upgradation or infrastructure loans from - - -SEWA Bank. 14 - ~ ~~~ ~ ~ ~ ~ ~ ~ ~~ ~ ~ ~ ~ ~ C :~ C. - :o This section of the report water or electricity connection or important requirement within the describes Phase II of the Action building a toilet and an overall system. This also meant Research, which involved the additional room out of the same that limiting debt:income ratio design of a prototype housing and loan, it would be more efficient to formulae need not be imposed in infrastructure loan department. merge housing and infrastructure order to determine the extent of The model is applicable to loans. It was established that in loan that may be sanctioned. financial institutions that wish to the perception of the target Instead loan amount decisions meet the housing and clientele, the differences between would be taken to suit individual infrastructure-related credit needs loans for on-site infrastructure loan repayment capacities, based of poor women in the urban, versus loans for housing on individual circumstances. informal sector. The prototype is upgradation, were not very In addition to a specialized based on the premise that clear - so to separate these loan housing and infrastructure loans individual loans are disbursed on types was deemed unnecessary department, two complementary the basis of a combination of and impractical. activities are also recommended: completed individual application * The importance of the position * Development of a centralized forms and field visits to each of the field worker within the loan building supplies raw material potential loanee's home to assess system, especially in order to outlet, so that loanees have easy her genuine need for the loan and ensure high repayment rates, was access to materials at a her loan repayment capacity. identified as a key role. This is reasonable cost. Instead of cash Following the results of Phase I, especially true for organizations payments, appropriate loan two important decisions were disbursing individual loans, that do utilization may be promoted by the made regarding the proposed new not rely on social or peer pressure issuance of 'materials vouchers,' system: through group formation, to which can be redeemed by clients * It was decided that since most ensure high loan repayment. The at the materials centre. housing upgradation loans to the close interaction between the field 0 Technical assistance in housing informal sector poor are used for a worker and loan clients, through design, low-cost technologies, variety of integrated purposes, pre-loan sanction and post-loan cost estimation, building often including an infrastructure utilization site visits to the client's supervision etc. component such as getting a home was identified as an -w -~~* 4 bMI-lL SE4jAbAN A~~~~~~~~~~~~~~~N i - s . . 15 ,' -. ,, , , e - * *j*. * .. ... . Proposed Loan Process Map - External (for Clients) Proposed Loan Process Map - External (for Clients) Complete HI Loan20 Eligible to apply for loan, if Application Form member has regularly saved with the organization for at least one year 5 days Pre-loan sanction field visit by field worker, to applicant's home t 5 days Weekly loan sanction notice put up on common notice board - with details of all loan applications sanctioned during the previous week t 2 days Applicant signs loan contract with two guarantors; opens loan account; withdraws the loan in cash from her savings account } Within 3 months Post-loan assistance field visit by field worker to check proper loan utilization Up to 5 years _ ( ~~~Ongoing loan ~~~repayment 20HI Loan: Housing and/or infrastructure loan. 16 Vo~~~~~~~~~~~~~~~~ rL - , Proposed Loan Process Map - Internal (for Housing-and Infrastructure Department Personnel) Hi Loan Coordinator meets each HI Loan Coordinator posts applicant personally and helps details of sanctioned loans on her complete the Loan the organization's notice board; Application Form assists applicant to complete < , ~~~~~~~~~~~~~~~loan contract < , ~~~~~~~~~~and related formalities Completed Loan Application Forms are sorted daily, on area basis and HI Loan Coordinator issues distributed to field workers for 'loan sanction voucher' pre-sanction field visit in applicant's name and < , ~~~~~~~~~~~~opens a loan account for her Field worker visits applicant's home and completes Pre-Loan Sanction Form Applicant collects loan amount in cash from her savings account (less t f savings lien/administrative charges) Hi Loan Coordinator receives completed Pre-Loan Sanction Forms from field worker; applies her judgement and HI Loan Coordinator is completes the Loan responsible for timely Evaluation Form, stating amount of loan recovery in conjunction loan to be sanctioned, if any with field workers Hi Loan Supervisor reviews all completed forms and sanctions or denies loan; Managing Director double checks and accepts or denies loan 17 Y E ."- .I - * Proposed Personnel repayments are outstanding by I The following staffing pattern is more than three proposed to cover a projected months. workload of 25-30 daily field Field workers worker home visits to the loan will assist clients in L applicant's house. Each team of opening bank two field workers visits 12-15 accounts, collect f homes per day in order to assess repayments and whether loans are to be facilitate loans for _. sanctioned and to ensure housing and appropriate end-use of the loan. infrastructure With significant increases in the purposes. volume of business, subsequent K -i - ; adjustments could be made to 2 x Housing staffing levels. Coordinators . * 4 x Field workers (two teams of They will be two field workers each) based at the * 2 x Housing Coordinators organization head- * 1 x Housing Supervisor office counter for five days per They will correspond with week and go on field visits to keep mainstream housing finance Job Responsibilities in close contact with their loan institutions such as HUDCO and clients, on one fixed day per week. HDFC regularly and be responsible 4 x Field Workers The Coordinators will complete for submitting quarterly progress (Two Teams Covering the 'Housing Loan Application reports along with loan repayments Designated, Separate Form', following a personal to them (if re-finance has been Areas) interview with the client, at the accessed from these Prior to a loan being head-office. They will also organizations). sanctioned, the field workers will complete 'Loan Evaluation Forms', They will be responsible for go on a pre-loan sanction deciding whether to accept or overseeing all shelter-related assistance visit to the applicant's refuse a loan and justify each partnership projects, including home and complete the 'Pre-loan decision. regular liaison with the urban Sanction Form'. They will disburse the loan local body, technical support Within three months of the loan sanction voucher to the applicant, agency etc. being-sanctioned, the same team after completion of all formalities will go for a post-loan utilization including the completion of all the I x Housing Supervisor visit to the applicant's home and loan-related journal entries in the Accepts or refuses loan complete the 'Post-loan Sanction Bank's records. applications based on: Form' to ensure appropriate The Coordinators will monitor (a) Loan Application Form; utilization of the loan in line with loan recovery and coordinate (b) Pre-Loan Sanction Form; and the purpose stated in the Loan the field workers' recovery (c) Loan Evaluation Form. Application Form. visits to applicants' homes and Overall responsibility for The field workers will also make issue standard repayment overseeing housing and loan recovery home visits if loan reminder letters. infrastructure loans. 18 Proposed Housing Ti.1 :i - and Infrastructure f Loan System Pre-loan Sanction * Completion of Loan Application J - Form by Housing Coordinator, 4 following personal interview with the applicant. * Completed Application Forms sorted by area on a daily basis and handed over to the field workers I ____ for home visit. * Field workers complete Pre-loan Sanction Form following their visit to the applicant's home, and submit it to the Housing Coordinator. 0 Housing Coordinator opens a generates housing loan progress loan account for the applicant and reports every month and passes Loan Approval/Refusal posts the necessary journal entries these repayment reports to the * Housing Coordinator completes including the insurance premium; Housing Coordinator. the Loan Evaluation Form, based she updates the loan account 0 Standard letters requesting on an interview with loanee and every quarter. payment of installments that are other documentation. 0 Loanee collects her loan in cash due are issued for loans that are * Housing Supervisor receives from the cashier. one to three months overdue. copies of applicant's file 0 Repayments that are more than containing all completed forms Post-loan Utilization three months overdue are notified and sanctions or refuses loan. 0 Housing Coordinator gives a list to the area field worker for a * Managing Director double of daily loans disbursed to field home visit in order to investigate checks and sanctions or refuses workers. the cause behind the delayed loon. 0 Field workers visit the applicant repayments; the field workers and * Housing Coordinator posts at her home and complete a Post- Housing Coordinators jointly sanctioned applicant's names on loan Sanction Form detailing loan monitor repayments closely. the organization's public notice utilization, within one month of Annexures 2-5 contain copies of board. loan receipt. the various forms designed for * Housing Coordinator checks use by the prototype Housing and Loan Disbursement whether all the loans have been Infrastructure Loan Department. * Applicants come to Housing used for the purpose stated on the Annexure 6 contains the Coordinator along with two Application Form and accordingly proposed 'Rules and Regulations' guarantors to sign the loan posts a quarterly interest rebate of regarding housing and contract, and are given a copy of 4 percent. If not, she imposes the infrastructure loans. A copy of the 'Housing Loan Rules and necessary penalties (see these regulations should be Regulations'. Annexure 6). provided to all loan clients and * Housing Coordinator issues a explained to them by the Housing loan sanction voucher with the Loan Recovery Loon Coordinator at the time of loan amount clearly written on it. 0 The loon recovery department loan application. 19 Structured Questionnaire Used for 'Housing and Infrastructure Finance Needs Assessment Survey' (Ahmedabad City) - Market Research General Information How many rooms are there in the current shelter? Name: Main occupation: Do you have any of the following: Vendor (i) Toilet Home-based worker (specify) (ii) Separate kitchen LI (iii) Kitchen garden E Crafts worker L (iv) Workshed L Bidi roller l (v) Storage room E Construction worker m Others (specify) L Do you use your home as a workplace? If so, how and which part of your home? Supplementary occupation: Vendor L Home-based worker (specify) LI Do you or anyone in your family own the house in Crafts worker L which you are presently living? Bidi roller O Yes L Construction worker I No Others (specify) LI If not, what rent do you pay and what collateral Current income (Rs per month): did you give? * Of the woman * Of the family Size of the household: If you are occupying common land, have you ever Adult: M F faced threats of eviction? Children: M F Type of the current shelter: Do you plan to buy a plot of land for housing? a. (i) Society L Yes L (ii) Chawl L No (iii) Chhapura L (iv) Footpath E If yes, when? (v) Others (specify) LI b. (i) Kuchha L Do you plan to buy or build your own house? (ii) Semi-pucca Z Yes L (iii) Pucca L No L 20 How much savings do you have with SEWA Bank (if Repayment status: any)? Fully paid up U Currently repaying U Default [ How long have you been saving with SEWA Bank? (i) Less than one year N How did you know about the loans available from (ii) One year U SEWA Bank? (iii) Two years (iv) More than two years U Do you know that SEWA Bank also gives loans for housing and infrastructure? Loan Details Year and month that current loan was made Do you want a housing or infrastructure loan? available from SEWA Bank, If any: * If so, why? * For how much? Purpose: * If not, why not? Amount required: Did anybody from SEWA Bank visit your house before santioning your first loan? Amount sanctioned: Did you face any difficulties in getting the loan? Total amount spent on this episode: Did you need any guarantors for the loan? Was this a problem? Has this loan Increased your earnings in any way? If so, by how much per month? Housing History Source, amount and rate of interest charged, on Where did you live before this house? excess amount spent (besides loan): Amount Rate of (Rs) Interest (%) Have you ever borrowed for housing or Self l infrastructure from any source? Moneylender U Friends and relatives U Others U Is getting access to credit more important, or the cost of credit more important to you? How long did it take to get the loan from SEWA Bank, after applying for it? 21 What is the highest rate of interest you would pay Have any of your housing loan applications to for a housing or Infrastructure loan? SEWA Bank been rejected? 0 If so, do you know why? What is inadequate about your current shelter? Do If yes, give the following details: you want to expand or add any infrastructure to Amount applied for: It? Year of application: Purpose: If you use your home as a workplace, what Do you have any pending housing or improvements would you want so that your infrastructure needs for which you need a loan? productivity could rise? Yes [ No If you are a home-based worker, have you ever Have you applied to SEWA Bank for this loan? taken a shelter-related loan? Can you describe how, If at all, this has increased your Income in terms of higher daily productivity? If no, are you planning to apply? What are your Infrastructure needs? Do you have Have you applied to any other source? access to water, sanitation and/or electricity? Yes No * if yes, specify the source: 22 Housing and Infrastructure Loan Application Form (To be completed by loan applicant) Personal Information Are the assets rented? If so, what is the monthly rental amount? Name: House Details Address: Type of house: Kuchha Pucco Age: Semi-pucca Marital status: Ownership/Legal tenure Married C] Own house -Single Other's name (specify) Widowed Rented Separated If rented, what is the monthly rental? If there is no ownership document, on Educational qualificatlons: whose land is the house located? * Savings Account No: How many rooms: * Total Savings: Rs One L Two L Family Details Three More than three Total number of family members: Loanee Total area of house: Spouse 100 sq ft Children 100-200 sq ft Other family members 150-200 sq ft 1 Total members 201 -300 sq ft More than 300 sq ft Occupation Details Purpose of Loan Own occupation and monthly income: Purpose Husband's occupation and monthly income: * House repair * House extension Total family monthly income: * Infrastructure (specify) * New house Do you own any of the assets/machinery used in * Others (specify) your/your spouse's occupation? 23 Total cost estimate Do you have any outstanding debts? If so, how much do you repay per month and what is the total amount Loan amount requested due? Monthly repayment capacity Do you own any other assets? Please describe. Loan History Information I hereby declare that I have carefully read all the terms and conditions cited above and they are Type of loan acceptable to me. * Secured * Unsecured Loan amount Signature of Signature of Date Date of receipt and source of loan Loanee Loan Coordinator Date of full loan repayment 24 Pro-loan Sanction Form (To be completed by housing loan field worker at the time of first site visit) Name: House type - windows: Wooden Address: Metal/iron No window Type of current house: Purpose of loan (specify): Society l Current housing and infrastructure need: Chawl Total estimated cost: Chhapura 1I Loan amount requested: Footpath Others .(specify) I If cost estimate has been undertaken, by whom: House type - walls: Self Bricks and cement E Relative Bricks and mud 1 Mason Thatching/wood walls E Technical agency Kuchcha with cement plastering Ci Others Kuchcha (mud) I Others LI Does the applicant want technical help with building/ repairing the house/adding infrastructure? If so, House type - flooring: exactly what help? Tiles 1= Stone E Does the applicant have a current loan outstanding Cement and plaster EL with the savings and credit organization/any other Mud E debtor? If so, how much is due? Others EL In your opinion, should the loan be sanctioned? House type - roofing: If yes, for what amount ? Cement/pucca E If not, why not? Iron EL Asbestos EL Any other remarks. Wood Cl Tent EL Plastic sheet EL None EL Field worker's Signature: Others EL Date of Home Visit: 25 Loan Evaluation Form (To be completed by the Housing and Infrastructure Loan Coordinator) Name of loan applicant: Should the loan be sanctioned? Does the applicant have regular savings with If no, why not ? the savings and credit organization? Current balance in Savings Account: Amount of loan to be sanctioned: Amount of loan requested: What lien should be retained on the loan ?. (Usually 20 percent of loan amount; if other amount, Does the applicant have any current loans please explain why) outstanding with the organization? Any other remarks? If so, is the loan application to be rejected? Loan Amount Sanctioned Approval of Housing Coordinator Signature Date Approval of Housing Supervisor Signature Date Approval of Managing Director Signature Date 26 Post-loan Sanction Form (To be completed within three months of loan receipt by housing loan field worker) Name: Describe the physical effect of the housing or intrastructure loan on the loanee's house or services available: Address: Before After Date of receipt of loan from the savings and If.the loanee Is a home-based worker, has credit organization: the housing loan helped to Increase her monthly income? If so, by how many rupees per month? Loan amount received: Check loanee's pass book for loan repayments Stated purpose of loan at time of application: Are repayments on time? If not, why not? How many repayments are outstanding? Check receipts for materials and labor, if How does the loanee plan to repay the loan and any? clear her outstandings? Check: Yes No Any other comments: In your opinion, has the loan been utilized as per the purpose stated to the organization? Field worker's signature: Date: 27 Suggested Rules and Regulations for Housing and Infrastructure Finance Loans (Maximum loan amounts, repayment terms, penalties, etc may be adapted by specific financing organizations) 1. Loans may be for any amount between Rs 1,000 on a quarterly basis. and Rs 25,000. 7. If a loan is used for any purpose other than (2) 2. Loans from the housing and infrastructure loans above, the entire loan will attract a higher interest department must be used for the stated purpose only, rate of 1 7 percent. In addition, a cash penalty will be including: charged (for example, between Rs 500 to Rs 1,000). House repair/maintenance House expansion, e.g. addition of rooms 8. The organization will hold a lien (usually 20 Addition of infrastructure, e.g. electricity/water/ percent) over the savings account of each loanee with toilet/drainage an outstanding housing loan. When the loan is fully To build a new house/buy a plot repaid after five years, the savings account will become operational again and the credited interest 3. All loans are repayable in five years. rebate may be withdrawn, in a lump sum. 4. An applicant is only eligible for a housing loan, if 9. House insurance will be mandatory for all housing she has been saving REGULARLY with the loan beneficiaries. The organization will directly organization for one year or more. withdraw the insurance premium from the client's savings account. 5. Only one loan per account holder is allowed at one time. This includes related accounts held by 10. Each applicant taking a first-time loan from the children or relatives of the account holder. organization will be required to buy 5 percent of the loan amount in the form of shares in the 6. The interest rate charged on housing loans will organization. In addition, a transaction fee of Rs 40 be the same as that charged on all other loan (loans < Rs 5,000) or Rs 60 (loans > Rs 5,000) will be types - currently 1 7 percent per annum. However, charged, along with a nominator fee of Rs 5 per housing loans will get a rebate of 4 percent per guarantor. These charges will be directly debited from annum, credited to the loanee's savings account the loan amount. 28 0 f .> . -' J,,I L _ 6 4i )~ ,,- -~ '. 6(' K, 6,ws@loH'lt, : l}t~~~~~~~~~~~~~~~~~~~~~~ 6 4 S, dR~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~A 4,6 t , (} - t f u *; * [- -- i. . .i-,;,' 3 ;6 ,;;q' *6,, rJ Kx_JF_ Z_ia/;;gg 9 I > c i" (6t s th~~~~~~~~~~~~~~~~~~~~9 , , , For more information, please contact., -. - ~~~~~UNDP-World Bank Water and Sanitation. .6 - Program - South Asia '6 ,' 1 ;6! .55 Lodi Estate, New Delhi 110 003 India ' ,i; . Tel: (9l)-(0)11-4690488/9 Fax: (9l)-(0)11-4628250 . ;~~~~ .t- t ~E-mail: wspsa@worldbank.org ,' ' ' lGujarat Mahila Housing SEWA Trust 404, 4th Floor, Sakhor , Opposite Town Hall, Ashram Road, 55 LodiAhmedabt d - 380 009, India Tel: (91)-(0)79-6581659 Fax: (91)-(0)79-550644662 E-mail: wpahi@ahsgricenet:net. . ~~~~~0, 4t Flor Sahr, OpstTonHl, Asra Road 'Dbsigned by Media Workshop and printed at PS Press Services Pvt. Ltd. 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