SEWA Bank — A story of collective resilience
The term ‘Informal Sector’ was first introduced in 1971 by Keith Hart, who defined formal and informal income opportunities based on whether the activity involves wage or self-employment. In India, out of the 415 million informal workers (17–18) around 23% are women.
It is known that women are almost always involved in some kind of productive activity, but much of their work is invisible, and they are largely employed in low skilled, low paid informal work with little or no social security — for instance, as domestic workers or self-employed home-based workers.
The need for creating their own financial institution:
These needs of women workers in India have been historically sidelined. Struggling to run their small-sized businesses under the excruciatingly exorbitant lending rates of middlemen and ignored by the formal banking systems, some women with SEWA in Ahmedabad reached their tipping point and proposed creating a bank of their own, to meet their credit requirements. The following issues made a strong case for the creation of a bank-owned and run by women:
- The need for capital for running their day to day business as well as for buying equipment for this business.
- The need for an alternative to exploitative terms of money-lenders
- The need to find a safe place to put their savings
- The need to have more accessibility in availing banking services
To address the above problems for women in the informal sector, Shri Mahila SEWA Sahakari Bank Ltd., popularly known as SEWA Bank was born.
How it started:
In May 1974, SEWA Bank was registered as a cooperative bank (with a share capital of Rs. 40,000 contributed equally by 4,000 women) under the dual control of The Reserve Bank of India and The State Government — providing banking services to poor, illiterate self-employed women and achieved profitability in the first year of operations.
Between 1974 and 1977, the SEWA Bank concentrated on attracting deposits from self-employed women and served as an intermediary to enable depositors to obtain loans from nationalized banks that are required to lend to the poor. During this period, about 6,000 members received nearly Rs Rs. 25,00,000 in credit. Initially, the nationalized banks charged 9–16 per cent interest, but they reduced the rate to 4 per cent as a result of SEWA’s lobbying with the Government. In 1976, the SEWA Bank started to extend loans to its depositors from its own funds and gradually withdrew from the credit arrangement with the nationalized banks.
Model:
The bank mandates savings from its members before it can provide credit to its customers. The bank has branches embedded locally, wherein customers can come and deposit money, get their passbook updated, apply for loans etc. What makes the bank very successful, is its Bank Saathi: Bank Saathis are employees of the bank that provide doorstep banking services so that women do not have to leave their houses to be able to pay back loans or deposit their savings. Currently, the bank employs 100+ Bank Saathis that on average cater to 500–600 customers across a span of 3–4km. These women are local residents of the area that they work in, providing a huge impetus to the goodwill of the bank and playing a crucial role as financial advisors to their customers — ensuring productive use of loans as well as minimal non-performing assets.
Journey of growth:
With close to 50 years of operations, around 6,00,00 women customers and upwards of 300 employees and a loan portfolio of Rs. 189 crores, SEWA Bank has:
- broken the vicious circle of indebtedness and dependence on middlemen and traders
- increased the bargaining power of the women. They can now organize themselves, bargain for better prizes and form their own economic units such as cooperatives.
- not only enabled its members to come out of the clutches of money lenders, but also to develop the skills necessary to deal with formal financial and other institutions, to gradually learn to make more productive use of their money.
- helped women find a sense of community and has helped enhance their self-confidence
- provided the badly needed banking infrastructure which can serve the self-employed and the small businesses
- enabled their customers to now have their own hand-carts, sewing machines, looms and tools for carpentry and blacksmithy. Many of them have upgraded their skills, expanded their business and increased their income.
SEWA Bank continues to provide financial literacy to women, to empower them with better decision making abilities. When the lockdown hit customers, the bank offered a moratorium on loans, extra credit and drawing on deposits. Contrary to trends in other large publicly and privately owned banks, SEWA Bank increased its balance sheet size from Rs 425 crore pre-pandemic to around Rs 500 crore and added 30,000 new depositors.
Coming up next is the account of Donatekart — the Amazon for donations in India, which has helped funnel ~Rs. 150 Cr. in donations since it was founded in 2016.
