The Bangladeshi Nobel Laureate, Mohammad Yunus' model of micro credit has been his inspiration. But Swami Shuddhananda Brahmachari, the founder president of socio-religious organisation, Loknath Divine Life Mission (LDLM), has tread a different path to bring micro credit to the remotest and poorest belts of Sunderbans region in West Bengal.
LDLM's model, through a Self Help Group (SHG) is unique and different from any of the existing models practiced in India. According to Brahmachari, although his own method has the essence of Yunus', in practice and implementation it is totally different.
A professor of economics, Brahmachari's model aims at direct credit linkage between banks and SHGs, completely eliminating agencies that play the middleman, such as NGOs. In an interview with DNA, Brahmachari said that LDLM's role is to create SHGs through awareness, training and organisation and then enable their credit linkage with the banks.
"In India, mainly two types of SHG models are in operation. The first is where Nabard (National Bank for Agriculture and Rural Development) directly appoints NGOs and gives them loans at certain interest rates, and the NGOs in turn give loans to SHGs at a rate higher than what it borrows. The second, popular model is same as the first one with the exception that banks in place of Nabard give loans to the NGOs," Brahmachari told DNA.
However, in LDLM's version, the banks lend directly to the group at a fixed interest rate, and the group in turn lends to its individual members at an increased rate. "The uniqueness of this model is that the income earned from the difference in interest rates is added to the income of the group, which it can again recycle in due course," Brahmachari said.
He added that unlike the prevailing models in India, LDLM does not expose its groups to credit linkage with banks at the initial stage. "First LDLM forms groups of 12 or 13 and for the first three months we train and nurture the groups and most importantly create awareness about savings by showing them how to save, even from the limited income earned. During the initial nurturing period, each member of a group has to deposit Rs 20 with the group every month. After the completion of the nurturing period the entire accumulated money is deposited in the group's bank account, which acts as security in case of disbursement of the first bank loan to a group," Brahmachari explained.
LDLM started implementing the model in 2000 and currently 378 such SHGs nurtured by it are fully in operation.
According to Brahmachari, the basic advantage of direct credit linkage between banks and SHGs, is that the group can disburse money to its individual members according to the requirement of the individuals.