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SEWA BANK, INDIA

Proudly Owned by the Poorest Working Women

On July 23, 2007, Manjulaben Vaghela, a waste paper picker by trade, was elected President of the Board of SEWA Bank in Ahmedabad, India. A client of SEWA Bank for 31 years, Manjulaben is the first working-class woman to chair the SEWA Bank board. Her election represents a historic event, particularly in India, where the poor have traditionally remained locked in positions of low status with little possibility of advancement. Indeed, the entire composition of SEWA Bank’s board reflects its passionate commitment to engaging, supporting and empowering the very poorest working women.

Out of a full board of ten, there are only two “white-blouse” board members. One of these is Jayshree Vyas, SEWA Bank’s Managing Director, a CPA who was formerly a financial analyst with the Central Bank of India. Among the other members, there is a vegetable vendor, a bidi- (cigarette) roller, a quilt-maker, an embroiderer, a food processor, a child care provider and a head-loader—a woman who carries loads through the streets on her head. Like the other 300,000 clients of SEWA Bank, 70% of the board members are illiterate. Their occupations are typical of SEWA’s client base.

Manjulaben Vaghela (center), President of the Board of SEWA Bank, with fellow board members.

A trade union for marginalized women workers

SEWA—the Self-Employed Women’s Association—is first and foremost a trade union for undocumented women workers. In India, such workers, also called the informal sector, make up 93% of the population and 94% of all working women. These women, whose labor often provides for their families’ survival, have lived precariously, toiling for meager wages without any training, health care, child care or support in old age. Denied access to mainstream banking, they are vulnerable to exploitation by moneylenders who are often their only source of cash for emergencies or business credit. The poor in India have traditionally been exploited by moneylenders who charge exorbitant rates of interest, condemning many working women to a vicious cycle of poverty, dependence and debt.

But in 1974, Ela Bhatt, an Ahmedabad lawyer, took a radical step to improve the status of poor women workers. A disciple of the Gandhian approach to development, Ms. Bhatt helped a group of undocumented women laborers from the slums of Ahmedabad organize and form their own labor union—SEWA. This organization provides a wide range of services to its members to help them meet their families’ basic needs. These services include skills training, technical and management training, guidance in marketing and accounting, literacy classes, child care, maternal and health-care education, a childbirth stipend, widowhood and health benefits, group insurance and, through SEWA Bank, a full range of financial services.

SEWA, the labor union, has a total of 800,000 members with branches in several Indian states, including Gujarat, where Ahmedabad is located. SEWA Bank, an affiliate of Women’s World Banking, operates only in Ahmedabad and the surrounding villages. SEWAs in other states are in the process of building their own, locally-based, autonomous, banks.

Another distinguishing feature of SEWA Bank is its large proportion of savers—savers outnumber borrowers by three to one. Most other microfinance institutions (MFIs) who provide credit can only offer savings if they go through a complex formalization process. SEWA, however, was conceived as a fully-fledged bank for the poor. “Women have a basic instinct for saving,” says Jayshree Vyas. SEWA Bank’s flexible, voluntary saving schemes help members accumulate assets. They can make deposits daily, weekly or monthly and withdraw from their savings at any time.

Meeting women’s life-cycle needs

Whether savings or credit, SEWA Bank’s products are specifically designed to meet the life-cycle needs of working women. Emergency needs such as health problems or the death of a family member are covered by SEWA Bank’s insurance scheme. Planned needs—children’s education, the purchase of a house, expenses incurred for a festival or wedding—are provided for through savings schemes of different durations. Productive needs for members’ businesses—buying inventory or equipment or making repairs—are supplied through credit. Any member who takes out a loan must first demonstrate sound financial performance by saving regularly for six months.

SEWA Bank charges around 17% interest per year on loans. Local moneylenders often charge as much as 120% per year. Commercial banks charge slightly lower interest than SEWA (about 14%) but as Jayshree points out, “They don’t lend to the poor.” On savings, SEWA Bank pays about 8% per year.

Another crucial life-cycle need often overlooked by the poor, who tend to live day to day, is providing for old age. “Poor women have to work till they die,” says Jayshree, “We have 80-year-old members who are still taking business loans from us. So we thought we should introduce this product so that they also can retire.”

India’s banking regulations, however, stipulate a ten-year limit for savings accounts. So in 2006 SEWA Bank joined forces with Unitrust, a large mutual trust, to provide old-age pensions for its members. SEWA Bank clients can pay into the fund between the ages of 18 and 55, and can withdraw their pensions any time after age 58, when they can choose either an annuity or a lump sum. This product proved immediately popular. During its first year, 35,000 women enrolled in the scheme.

Financial literacy for long-term planning

Changing poor women’s mindsets and helping them plan for the future is central to SEWA Bank’s approach and is the impetus behind its Financial Literacy program. “It’s about changing mental attitudes,” says Jayshree. “Instead of living—and saving—on a day-to-day basis, you have to think about tomorrow.” The Financial Literacy course meets once a week for seven weeks and uses videos and other visual aids for illiterate members. It helps members understand the difference between exploitive and non-exploitive lending practices; it explains the difference between productive expenditures (school fees) and non-productive expenditures (ice cream for the kids). A more serious non-productive expense in India, even for the poor, is the high cost of elaborate weddings. “We have started a special campaign to try and convince women and their families to spend less on marriages,” says Jayshree. “Awareness is building. The daughters of our members have started getting this concept. Now they tell their parents, ‘Instead of spending on my marriage, why don’t you spend on my education?’”

SEWA Bank has four computer-equipped offices in Ahmedabad, but most of the day-to-day work of collecting interest and savings and disbursing loans is done by 80 banksaathis, or bank-companions, clients of the bank who have been chosen as local leaders by their peers.

After 33 years of empowering women, SEWA Bank has become a venerable institution, creating a ripple effect throughout India and beyond. Ela Bhatt received the Magsaysay Award (known as Asia’s Nobel Prize) in 1977. She has served on the government of India’s Planning Commission and chaired the National Commission on Self-Employed Women. As a result of her efforts, a national credit fund for women, a social security fund for women and a day-care fund were incorporated into India’s eighth Five-Year Plan. In July 2007, Nelson Mandela appointed Ms. Bhatt a founding member of his new group of “Elders”—world-renowned figures who can use their moral authority to tackle some of the planet’s biggest problems.

SEWA Bank as an affiliate of Women’s World Banking

Ela Bhatt was also a founding member of Women’s World Banking (WWB) and is an honorary WWB board member for life. Jayshree Vyas also serves on the WWB board. Although SEWA Bank has always had a leadership role in support of poor women, Jayshree says that membership in the WWB network has been a valuable source of learning for the bank. “We’ve learned by sharing,” says Jayshree, “and from others’ sharing.” Members of SEWA Bank have visited WWB network members in the Dominican Republic, Pakistan, Chile and Colombia. In the Dominican Republic they observed Palm Pilot technology that will be used by the neighborhood banksaathis. And Jayshree cites WWB’s Global Network for Banking Innovation (GNBI) as a source of banking know-how for SEWA Bank. “Through the banks in the GNBI we learn how formal banks think,” she says. “We got the idea for our pension product from Women’s World Banking, and the idea for our Financial Literacy program as well.”

Adopting innovative approaches through membership in the WWB network is an important part of SEWA Bank’s growth strategy for the next five years. By opening more branches, building touch-screen information kiosks in every Ahmedabad slum, using a new computerized client database and adopting a software package that helps identify the most suitable products for each client, SEWA Bank expects to reach one million clients by 2012.

SEWA Bank has been financially self-sufficient since 1975, its second year of operations, and pays dividends (currently 15% per share) to its clients, all of whom are shareholders. Jayshree says it is this sense of ownership that SEWA Bank members value most. “It’s the women who own us,” she says. “They elect our board members, so this bank is completely managed by them. They decide the policies, they monitor our performance. The best thing is that whatever we earn, they get a share in the earnings. We have been very proud of that since the beginning.”

This quiet, unshakable pride is exemplified by SEWA member Manjulaben, the waste-paper picker turned President of the Board. Through her labor, her son was able to go to college and medical school and is now a successful physician. Both Manjulaben and her son were recently honored by the college that he attended. He has tried to convince her that after all these years she should finally stop working, but Manjulaben won’t hear of it. “Why are you ashamed of my labor?” she asked him indignantly. “It’s because of my labor that you became a doctor. Besides, I want to work!”