Compare and Contrast Paper: Multiple Meanings of Money
Instructor: Eric Hinderliter
ECO 442—Development Economics
LCC International University
Yanina Belaya
October 24, 2013

The book ‘Multiple meanings of money’ written by Smita Premchander, V. Prameela, M. Chidambaranathan and L.Jeyaseelan analyses what microfinance money means to women, in particular it examines the viewpoints of individual women and women-only groups from India. These groups, called SHG (self-helped groups) represent the community of 15-20 women involved into savings and credit activities. Usually these groups are formed on voluntarily basis, but with encouragement of an external agency (NGO, MFI, government). The case study about the Grameen Bank of Bangladesh, presented in the economic development textbook, written by M.P. Todaro and S. C. Smith, is a good practical illustration of how credits can be provided to the groups of poor women. Considering that both sources emphasize microfinance programs delivered through women-only groups, it is interesting to analyze this emerging trend of the microfinance market. While both sources, book and textbook, bear some superficial similarities about the characteristics of SHG’s, benefits that involvement in SHG’s provides for women, and the reasons why ‘external’ agencies choose to target SHG’s, differences through investigation of these two sources are also noticed.

The book ‘Multiple meanings of money’ and case study on Grameen Bank represent the self-helped groups as mechanisms of delivery of microcredit to the poor(Premchander, Prameela, Chidambaranathan, & Jeyaseelan, 2009, p.59). They mention that this approach to the poor is reasonable, as most of villagers are skeptical about dealing with banks (Todaro, & Smith, 2006, p.242). For rural women, self-helped groups mediate and create a bridge between individual women and local institutions (Premchander et al., p.157). Moreover, both sources mention that this approach is important for women, as it creates the possibility to use another source of money – their own savings. From ‘Multiple Meanings of Money’ it is known that women use their own savings differently, from the loan provided by the ‘external agencies (Premchander et al., p.58). The book explains that most of women get involved into borrowing with the purpose to sustain themselves and their family members at a bare minimum level of living. Considering the fact that MFI’s and NGO’s tend to encourage ‘production’ usage of loans, rather than ‘consumption’ or ‘medical treatment’ usage of loans, saving their own funds though the self-helped groups appears to be a better way for women to receive money for their own needs. (Premchander et al., p.150). For example, members of the group in Ganjam prefer only to engage into the credit-saving activity of their SHG. They state that they would not take NGO loans, as NGO’s fail to offer them money to meet their social needs and charge too high interest rates (Premchander et al., p.50). The case study in the textbook also mentioned that Grameen Bank works to facilitate the accumulation of savings among its members, which already means that Grameen bank realizes and accepts the importance and role of savings for women (Todaro et.al., p.243).

Analyzing SHG’s from the perspective of external’ agencies, both sources emphasize that targeting SHG’s is better than individuals. Primary benefit of it is that it helps to reduce risk and cost for credit-supplying organizations. Reducing risk is about improving expectations about repayment. If one member of SHG is not able to pay, others will repay the NGO/MFI (Premchander et al., pp.53-54). The book mentions that this process is encouraged by ‘joint liability’ characteristic of the group, while textbook mentions the same under the ‘mutual responsibility’ title. Moreover, Grameen bank states that it also saves time to control the use and repayment of the loan, because of informal peer-to-peer monitoring, or as it also called ‘collateral of peer pressure’ (Todaro et.al., p.242). In the book peer-to-peer monitoring is showed though the different loan histories of groups. One of the examples would be the Baramalingeshwara group, which practiced regular meetings and constantly encouraged savings inside the group. The group managed stability and flexibility of loan repayments from savings. To explain their success, they stated that they all know each other, thus the collection of savings was easy (Premchander et al., p.169). This group practiced peer-to-peer monitoring on the regular basis, but besides that they emphasized the importance of trust inside the group. The textbook also underlines that “members know the character of other group members and generally only join groups with those they believe are likely to repay the loans” (Todaro et.al., p.242). This mutual trust and support is also known as ‘group cohesion’. These mentioned above SHG’s characteristics, as well as the encouraged by NGO’s and MFI’s trainings, regular meetings and savings of SHG’s, contributed to the high repayment rates of MFI’s and NGO’s targeting women. In the case of Grameen bank, the rate is known to be over 90% (Todaro et.al., p.243).

While both sources bear some superficial similarities about the characteristics of SHG, benefits that SHG provide to women, and to ‘external’ agencies, differences in these sources regarding this information are noticeable. First of all, it is important to mention that the concept of self-helped group in the ‘Multiple meanings of money’ represented not just as mechanisms of delivery of microcredit to the poor, but also as the broader strategy of empowerment (Premchander et al., p.59). Actually, it suggests that SFG’s should be treated as the institutions, which have their own character and processes, which are very important in order to understand how women actually deal with finance. It leads to the conclusion, that textbook talks about SHG’s only from the perspective of external agency, i.e. the Grameen bank, thus doesn’t provide much information about the relationships inside the group and it’s possible difficulties. The book provides a larger insight of the social costs of group processes, that is, constraints to group borrowing and joint liability approaches. For example, the case study of Grameen bank doesn’t mention that ‘joint liability’ characteristic of the group may not occur. In contrast, the book underlines that those people that don’t pay may have demonstrational effect and cause non-repayment or splitting of the group into two or more branches. It also talks about coercive peer pressure, loss of trust inside the group, and the likelihood that the poorest and most vulnerable will be excluded or further humiliated (Premchander et al., p.54). Basically, the limited information of the case study provides only positive view of SHG and explores the benefits, which SHG creates for MFI, while the book explores deeper the characteristics of SHG and shares significant for understanding issues related to the inner-relations of SHG’s. In conclusion, I want to admit that both sources provide almost similar information regarding the benefits and characteristics of self-helped groups. However, the book offers to the reader a much broader explanation of why and how SHG institutions became an important trend in microcredit activities. It carefully explains how women actually borrow, use and repay the loans, which I consider to be important information for those who seek to improve lives of women in India and encourage economic development of the country. Moreover, the book includes not only the positive description of SHG, but mentions negative sides of SHG’s internal processes. Thus, I can say that I find the book to be more complete and knowledgeable regarding the reality of self-helped groups as institutions with their own character and processes.

References:
Premchander, S., Prameela, V., Chidambaranathan, M. & Jeyaseelan, L. (2009). Multiple meanings of money: How women see microfinance. Artxel, New Delhi: Vivek Mehra for SAGE publications India Pvt Ltd.
Todaro, M. P. & Smith, S.C.(2006). Making Microfinance Work for the Poor: The GramBank of Bangladesh. Economic Development (9th ed.), (pp. 241-247). United States of America: The Addison-Wesley series in economics.