Social Banking to Meet Needs of the Poor
Prof. S. Tilakarantna, December 1993
University of Sri Jayawardenapura, Sri Lanka
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The fifty-two Janashakthi banking societies in the southern Sri Lankan
district of Hambantota with a membership of nearly 20,000 poor rural women
have succeeded in evolving an innovative alternative banking practice. It is
a social banking process that caters specially to the development needs of
the poor in sharp contrast with conventional commercial banking, which has
marginalised the poor.
As is well known, commercial banks have not been successful in servicing the
development needs of the poor given their profit orientation and style of
operations. The transaction cost of servicing the poor has proved too high
for commercial banks.
Moreover, high rates of loan delinquency and defaults have characterised
their operations whenever they have stepped out of the mainstream to extend
credit facilities to the poor.
Let us start with some basic statistics about the Janashakthi banking
societies. In the past three years, over 24,000 small loans (an average of
Rs 1,600) have been given to poor women for either cultivation or
self-employment activity, and the repayment record has ranged from 93 to 100
percent depending on the administrative division.
Starting from a mere Rs 1,000, the size of the loan that a member can take
has increased up to Rs 7,000 currently and the loan limit can be expected to
rise progressively as the resource base expands and the members' demand for
productive credit rises.
Currently the resources mobilised through shares, savings and deposits of
various forms have exceeded an average of Rs 725 per member. These
statistics reveal an impressive record for a people's initiative, which is
only about three years old.
The above statistics, impressive as they are, cannot by themselves capture
the performance and impact of this social banking programme. There are many
quantitative achievements, which cannot be reduced to numbers. All of the
dimensions of the human and social development process cannot be presented
Successful development processes enable hitherto marginalised people to
enhance their dignity, self-respect and social recognition. People come into
their own, express their creativity, become more human, and demand that they
be treated on equal terms. They develop capacities to make decisions and
implement them, reduce their dependence on the elite, and become
increasingly self-reliant over time.
In short, people hitherto deprived and marginalised, become empowered. As we
shall see, such qualitative achievements - not easily measurable - are
important aspects of the social banking programme as implemented by the poor
women at Hambantota.
The Janashakthi banking programme is more than a savings and credit
operation of the usual type. Savings and credit activities are carried out
by the women who have mobilised and organised themselves, who have become
development conscious and are willing to take initiatives for improving
their socio-economic conditions. In other words, a process of social
mobilisation (awareness creation, building confidence in one's capacities,
and readiness to take initiatives to change one's situation) is an integral
component, which operates side by side with the savings-credit operations,
in fact reinforcing the latter.
A specially trained cadre of social mobilisers operates at community level
for this purpose. They are a new type of extension worker who stimulates and
assists people to initiate development actions; they are animators and
facilitators rather than delivery agents of pre-packaged materials and
Building a network of organisations where the membership is confined to the
poor is another distinguishing feature. Starting at five-member groups at
the base, the organisation structure has moved up to cover a women's
development society at the village level, a banking society for an average
of 6 to 7 villages, and culminating in the Women's Development Federation,
the apex body.
This bottom up organisational structure has broken the isolation of poor
women, created a forum for interaction and given them social recognition.
They now have an effective instrument to deal with outside agencies and
bargain for resources and service deliveries. They are no longer atomised
individuals; they have emerged as a social power of some sort to reckon
The organisational network has been used as an instrument to mobilise
resources both from internal sources (from amongst the members) and external
resources (various donors and service delivery agencies). The financial
resources (shares, savings, deposits of various kinds and loan funds)
mobilised have amounted to a little over Rs 18.7 million as at end of
In addition training of skills of different sorts - treasurers,
administrative personnel, social mobilisers, group leaders and other office
bearers - technical training, and experiences gathered in organising and
managing different programmes and projects, have enabled the creation of a
substantial stock of human capital (knowledge, skills and experience) within
the organisational structure.
The organisational strength and the mobilised resources are being used by
the membership to achieve three fundamental goals:
(i) Generating new incomes and employment opportunities through appropriate
economic activities as decided by the families concerned;
(ii) Raising the capacity of families to achieve basic needs, in particular
to a measure of stability in family consumption in times of distress (e.g.
crop failures, family illness and dislocations), nutrition, health and
(iii) Raising the social status and developing the power base to deal with
problems of poverty. The members of the Janashakthi banking societies have
many achievements to their goals. A solid beginning has been made and they
are marching forward on the right path.
The Janashakthi bank programme was started with small contributions of the
poor women of Hambantota district. But from the beginning it was evident
that the programme needed a helping hand from outside. In this situation the
intervention of the Sri Lanka-Canada Development Fund has been of immense
help. They have had the unstinting support of its director Mr P P Abeydeera.
The Sri Lanka-Canada Development Fund has extended Rs 350,000 in assistance
to enable the Women's Development Federation to buy computers, photocopying
machines and other equipment for its head office.
The availability of this equipment has made the Janashakthi banking
operations more efficient. The Women's Development Federation has been able
to record and analyse data about the banking operations and the 20,000
members with ease as a result of this support.
The Sri Lanka-Canada Development Fund while extending financial support to
the Women's Development Federation did not lay down strict conditions or
interfere in the internal workings of the organisation.
The Women's Development Federation and its constituent organisations the
Janashakthi banks and the women themselves have had the freedom to develop
progressively, strengthen their institutions, and maintain their
The poor women of Hambantota in the process have become dedicated change
agents in the alleviation of poverty and in developing their areas,
generating jobs and creating confidence among themselves.
Women's Development Federation, Hambantota, Sri Lanka