CREDIT CONNECTIONSMeeting the Infrastructure .,'Needs of the Informal

UNDP- Sector throughAi ;vofin;b.World Bank t .

{in,.Urban, I,ndia. .,,[24868uFI,.Iii - .July 1999

South AsiRegion. '

This reportdescribes-. . 4 .the 'Action Research`-j:.........8 s >;--. .component-of the studyon 'Meeting.InfrostrudctureNeeds of r

the Informal Sector ,through Micro finance inUrban, In'dia'.'

The Action Research.compionent was'designed tdocomplement -the four cos,e"tt4dies'of<..'.'.' $, ,;2existing micr6ofinnce .institutions providing _-s

-- rdtforow,ater s'upply ' ~p, ' ,\{ ,. sand sanitation to poorwomen in the informal `i' ,'sector and to explore,the . . -\ -'

proctical requirements of t,microcredit forinfrostructure. Action -,

Research wa's carried ' '.- out between December I1998 and April 1999.

Guijarat MahilaHoiising SEWA Trust

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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 anddeemed useful to develop a appropriate, demand-responsive infrastructure Loanprototype housing and loaning system and to develop Departmentinfrastructure 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, athis 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 inThe 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 theNeeds 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 inspecialized system for housing Research: Phase 1'. the following section entitledand 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 developedhousing 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, refinedtarget clientele of the micro- guide. and eventually replicated byfinancing institution is required. microfinance institutions.

4 I

-4.'~~

,Needs Assessment Study of the Housing and Infrastructure FinanceNeeds of Women in the Informal Sector, Ahmedabad

Introduction Research Team women had previously takenhousing, 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 ParivartanThe 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 Surveyhousing 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-siteupgradation, 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-WorldBank and Sanitation Program - South Asia,1 999.

5

a4-

Findsngs of tle Survey

1. General Information

Main Occupation of RespondentsMain Oscupation No. of Respondenht % of RespondentsVendor 2 40 27Home-based worker' 50 33Labor and services4 30 20Housewife5 12 8Others 18 12Total 150 100

Distribution of Respondents liy IndividualMonthly IncomeIndhviddal Monthly No. ofincome (Rs) Respondents % of Respondents0 10 7<300 5 3301 -600 28 19601-900 22 15901-1,100 30 201,101-1;300 12 81,301-1,500 20 131,501-1,700 01 11,701-1,900 01 1>1,901 21 13Total 150 100

Distribsti ilho-Respondentsiby -MonthlyHousehold incomeMonthly Household- No. ofIncome (Rs) Respondents % of Respondents<500 1 1501-1,000 6 4 2Vendors include door-to-1,001-1,500 12 8 door saleswomen as well1,501-2,000 26 18 as stationary vendors2,001-2,500 171 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, papadrollers, etc.

~~~~~~-- of 4 l~~~~~~~~~~~~~~'ncludes maidservants,Distribsution of lRespondents by Number of Persons41cuemadrvnsRespo ndents Number;ofPersos ragpickers, constructionLiving in Household workers and other

No. of Persons No. of Respondents % of Respondents daily wagers.1-2 5 3 520 percent of respondents3-4 37 25 included non-clients of5-6 50 33 SEWA Bank. All the7-8 41 28 housewives interviewed

Total 170 100 belonged to this samplesub-section.

6

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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 Typein which Current House is Located of Current House ConstructionType of House No. of % of Type of Current Ne. of % of

Respondents Respondents House Construction Respondents RespondentsSociety7 13 9 Kuchcha'" 45 30ChawP8 76 51 Semi-pucca'2 64 43Chhapura 9

35 23 Pucca"3

41 27Others'° 26 17 Total IS0 100Total 150 100

- ------ - ------------ Distribution of Respondents byHouse Ownership Details Number of Rooms in Current

Shelter1 5Details No. of % of

Respondents- Respondents No. of Rooms No. of % ofOwnership with clear title 37 25 Respondents RespondentsInformal ownership'4 74 49 1 112 74Rented house 39 26 2 25 17Total 150 100 3 10 7

>4 3 2Total 150 100

Number of Respondents whose Distribution of Respondents byHouses have Special Purpose Spaces Existing Infrastructure Facilities in(includes covered and uncovered spaces) Current ShelterType of Space No. of % of Type of Infrastructure No. of % of

Respondents Respondents Respondents RespondentsSeporate kitchen 54 36 Own bathroom 62 41Open space 8 5 Own toilet 83 55Workshed 6 4 Own water connection 107 71Storage room 5 3 Own sewer connection 122 81Not applicable 87 58 Internal electricity in home 126 84

7 Society: Regular colony containing full, individual infrastructure facilities.8 Chowl: Slum containing kuchcha or semi-pucca houses, with limited individual and some collective infrastructurefacilities.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.

'3 Pucca: 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 notpossess 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 ' it v | 1~~~I

9~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I

Findings of the Survey

Ill. Housing and Infrastructure Loan Details

Distribution of Respondents Aware Source of Awareness about Housingof SEWA Bank's Housing and and Infrastructure Loans AvailableInfrastructure Loans from SEWA BankAware of Housing and Ne. of % of Source No. of % ofInfrastructure Loans Respondents Respondents Respondents RespondentsYes 131 87 Employees of SEWA Union 36 24No 19 13 Employees of SEWA Bank 42 28Total 150 100 SEWA Bank Board of Directors 30 20

Members of SEWA Union 23 15Not aware of SEWA Bank loans 19 13Total 1SO 100

Distribution of Respondents by Distribution of First Loans fromTotal Number of Loans taken from SEWA Bank by PurposeSEWA Bank Purpose of No. of % ofTotal Number No. of % of Loan Respondents Respondentsof Loans Respondents Respondents Housing or infrastructure 60 400 31 21 Working capital for own1 48 32 business 38 252 35 23 To buy equipment for own3 14 9 business 13 94 7 5 Consumption loan 8 5> 4 15 10 No loan 31 21Total 150 100 Total 1SO 100

Comparison of First Loans by AmountRequested and Amount SanctionedLoan Amount No. of No. of Loans

Effect of First Loans (Rs) Respondents Sandionedon Increased Earnings Less than 5,000 40 71

5,001 -10,000 31 33Increased Earnings after No.of % of 1,001-15,600 6 4Taking First Loan Respondenht Respondents 15,001-20,000 7 1

Yes 50 33 20,001 -25,000 23 10No 69 46 More than 25,001 12 0No loon 31 21 No loan 31 0Total 150 100 Total 150 119

16 It was difficult to obtain accurate

Sources of Additional Funds to Supplement First answers, as many respondents foundLoan and Rate of Interest Paidly it hard to remember and quantifywhether the first loan they had takenSources of No. of Monthly Rate of from SEWA Bank, had led toAdditional 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 soughtOwn savings 4 4 additional funds to supplement theirMoneylenders 4 1 2 1 first loon from SEWA Bank 100Friends/relatives 19 10 1 2 4 2 fOthers 3 1 1 1 percent of them had taken loansTotal 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 Futureare Willing to Borrow Housing or Infrastruture LoansAnnuda Interest Ne. of % of Want Future Ne. of % ofRate Respondents Respondenht Lean Respondents Respondents12% 60 40 Yes 138 9218% 85 56 No 12 830% 1 1 Total 150 100No response 4 3Total 150 100

I Ui,t~Ni~s.~ Dlst.ib ion - , Distribution of Respondents byUnm-eiit Wiided' Distribiution' of Future Infrastfructure Needs InResp'onde'nts Purpose of Future Current House'"Housing or In'frastructure Loanis Infrasruture No.of %of

Purpose No. of % of Needs Respondents RespondentsRespondents Respondents Bathroom . 86 57

Repair walls 51 34 Toilet 52 35Repair rf 2 43 Woter connection 29 19Repair roof 24 Ir0Repair floor 41 27 Sewer connection 22 15Add room 37 25 Electricity connection 24 16Build terrace 44 29Add bathroom 52 35Add toilet 30 20water connection 06 4 sewer connection 06 4 Analysis - Unmet/Future Housing andSewer connection 05 3Connection for home eledricity 03 2 Infrastructure NeedsBuild/buy new house 25 17

The unmet needs for housing and infrastructurefinance among the women interviewed were assessedby asking respondents whether they wanted housingand/or infrastructure-related loans from SEWA Bank

Distribution of Res'pondenti by LoanAmoiEbuntio Required te,spoqeents F e Lin the near future. If so, they were asked the specificAmount Required to Meet FuturemHousing 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 stated0-5,000 12 8 that they had demand for future housing or5,00;-10,000 3 3 infrastructure-related loans. Nearly all of them10,001-15,000 3 215,001-20,000 11 7 (96 percent) expressed a willingness to pay interest20,001-25,000 22 15 rates of between 12-18 percent per year which is a>25,000 97 65Totul 150 100 realistic demand in line with market rates of interest.

This confirms that the poor are not demanding highlysubsidized credit, a common misconception. Thewomen surveyed reported that they were fully aware

"Multiple responses arising from multiple unmet needs. that it was unsustainable for an institution like SEWA19Multiple 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 Surveyconsisting of room and terrace(54 percent). Infrastructure V. The Effect of Housing and Infrastructure Loansupgradation loans - including the on the Productivity of Home-based Workersaddition of a toilet, bathroom, ----

water, electricity and sewer I Number of Respondents who Useconnections - were demanded by their Home as a Workplacea substantial number of Use their Home No. of % of

respondents. This again highlights as Workpleee R n R nYes 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 Workplacoloans in the future from SEWA Part of Heme No. of % ofBank to buy or build a new house. Respondents Respondents

When specifically questioned Room 30 60Kitchen 7 14

about their future infrastructure Open space near house 8 16needs, a majority of the women Workshed 2 4

Storage room 1 2expressed 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 percentreported that their main need was Workers that have Taken a

* . . i~~~~~ Housin or Ifstrudure Loanto get their own electricity from SEWA Lan

from SEWIA Bankconnection. This also serves to Taken Housing or No. of % ofhighlight 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 these13

M ¢ F -~ r _ I < _ _r;- ' L

Amount of Increaise in MonthlyIncome following Receipt ofHousing or Infrastructure Loan'Increase In Monthly No. of % ofIncome (Rs) Respondents Respondents0-100 14 28101-200 9 18201-300 10 20> 301 17 34 .- ,

Total 50 100

I' -.' 7

Distribution of Home-based 1' -Workers that Want to Take Future -'- - *

Housing or Infrastructure Loansfrom SEWA BankNeed Future HomeUpgradatlon or No. of % ofInfrastructure Loan Respondents RespondentsYes 47 94 1 -No 3 6Total 50 100

Analysis - The Effect of Housing andAC 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 infrastructureI . 5A -- <s 40t ; M ^ loans on home-based workers. This was of particular

interest to SEWA Bank, as one of its three main client

, groups are women who work from home.

As reported earlier, the survey covered 50

" %, 7 ... b2-t'~' .>- -(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 livingIL 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 futurehome 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~~~~~~~~~~~~~~~Ni - s . .

15

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Proposed Loan Process Map - External(for Clients)

Proposed Loan Process Map - External (for Clients)

Complete HI Loan20 Eligible to apply for loan, ifApplication Form member has regularly saved

with the organization for at leastone year

5 days

Pre-loan sanction field visit byfield worker, to applicant's home

t 5 days

Weekly loan sanction notice put upon common notice board -

with details of all loan applicationssanctioned during the previous week

t 2 days

Applicant signs loan contract withtwo guarantors; opens loan

account; withdraws the loan incash from her savings account

} Within 3 months

Post-loan assistancefield 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~~~~~~~~~~~~~~~~

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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 Formsare 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'shome and completes

Pre-Loan Sanction Form Applicant collects loan amount incash from her savings account (lesst f savings lien/administrative charges)

Hi Loan Coordinatorreceives 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 Directordouble checks and accepts or

denies loan

17

Y E ."- .I - *

Proposed Personnel repayments areoutstanding by I

The following staffing pattern is more than threeproposed to cover a projected months.

workload of 25-30 daily field Field workersworker home visits to the loan will assist clients in L

applicant's house. Each team of opening banktwo field workers visits 12-15 accounts, collect fhomes per day in order to assess repayments and

whether loans are to be facilitate loans for _.sanctioned and to ensure housing andappropriate end-use of the loan. infrastructureWith significant increases in the purposes.volume of business, subsequent K -i - ;adjustments could be made to 2 x Housingstaffing levels. Coordinators .* 4 x Field workers (two teams of They will betwo 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 financeJob Responsibilities in close contact with their loan institutions such as HUDCO and

clients, on one fixed day per week. HDFC regularly and be responsible4 x Field Workers The Coordinators will complete for submitting quarterly progress(Two Teams Covering the 'Housing Loan Application reports along with loan repaymentsDesignated, Separate Form', following a personal to them (if re-finance has beenAreas) 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 forgo on a pre-loan sanction deciding whether to accept or overseeing all shelter-relatedassistance visit to the applicant's refuse a loan and justify each partnership projects, includinghome and complete the 'Pre-loan decision. regular liaison with the urbanSanction 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 formalitieswill go for a post-loan utilization including the completion of all the I x Housing Supervisorvisit to the applicant's home and loan-related journal entries in the Accepts or refuses loancomplete 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; andthe 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 andloan recovery home visits if loan reminder letters. infrastructure loans.

18

Proposed Housing Ti.1 :i -

and Infrastructure fLoan System

Pre-loan Sanction* Completion of Loan Application J -

Form by Housing Coordinator, 4

following personal interview with

the applicant.* Completed Application Formssorted 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 HousingCoordinator. 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 andInfrastructure 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 LBidi roller l (v) Storage room EConstruction 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 LHome-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 LConstruction worker I No

Others (specify) LIIf 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) LIb. (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 UCurrently repaying UDefault [

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 UDo 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 UFriends and relatives UOthers 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 monthlyrental amount?

Name:House Details

Address: Type of house:KuchhaPucco

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 LTwo L

Family Details ThreeMore 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 DetailsPurpose 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 muchdo 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 theterms and conditions cited above and they are

Type of loan acceptable to me.* Secured* Unsecured

Loan amount Signature of Signature of DateDate of receipt and source of loan Loanee Loan CoordinatorDate 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/ironNo 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:

FootpathOthers .(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 ELIn 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 ELPlastic sheet ELNone 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? Currentbalance 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 loanfield worker)

Name: Describe the physical effect of the housing orintrastructure loan on the loanee's house orservices available:

Address: BeforeAfter

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 hermonthly income? If so, by how many rupeesper 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 NoAny other comments:

In your opinion, has the loan been utilized asper the purpose stated to the organization?

Field worker's signature: Date:

27

Suggested Rules and Regulations for Housing andInfrastructure Finance Loans(Maximum loan amounts, repayment terms, penalties, etc may be adapted byspecific 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 interestdepartment must be used for the stated purpose only, rate of 1 7 percent. In addition, a cash penalty will beincluding: charged (for example, between Rs 500 to Rs 1,000).

House repair/maintenanceHouse expansion, e.g. addition of rooms 8. The organization will hold a lien (usually 20Addition 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 fullyTo build a new house/buy a plot repaid after five years, the savings account will

become operational again and the credited interest3. 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 housingshe has been saving REGULARLY with the loan beneficiaries. The organization will directlyorganization for one year or more. withdraw the insurance premium from the client's

savings account.5. Only one loan per account holder is allowed atone time. This includes related accounts held by 10. Each applicant taking a first-time loan from thechildren or relatives of the account holder. organization will be required to buy 5 percent of the

loan amount in the form of shares in the6. The interest rate charged on housing loans will organization. In addition, a transaction fee of Rs 40be the same as that charged on all other loan (loans < Rs 5,000) or Rs 60 (loans > Rs 5,000) will betypes - currently 1 7 percent per annum. However, charged, along with a nominator fee of Rs 5 perhousing loans will get a rebate of 4 percent per guarantor. These charges will be directly debited fromannum, credited to the loanee's savings account the loan amount.

28

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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 Trust404, 4th Floor, Sakhor , Opposite Town Hall, Ashram Road,

55 LodiAhmedabt d - 380 009, I ndiaTel: (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. Era IgdapressObol nartin

at > _ t; ' ' 2 ' '6 t ' ' ;;; *?S',., ' j , ' ' . : , '' 6', ,W-t