THE "FRONT-STAGE" OF THE TWO MODELS - THE GROUP

Microfinance revolves around the "group". It could a samuh/sangha/mandal/dal/goshthi of the SHG Bank-Linkage model or the ubiquitous center of the Grameen MFI model - groups of women sitting together either in circle, or in rows. Our starting point is this "group". Building on the dramaturgical approach of Erving Goffman (1922-1982), who analyzed social interaction much like actors on a stage, we argue that both these models portray the group as their "front-stage". Both the Grameen MFI model and the SHG Bank Linkage model are based on group lending and construe the group to be this public space in which borrowers are serviced. The group is a constructed space which is their public face, where they carry out their task of loan disbursements and collection of repayments, fees, savings or other charges.

It is easy to be beguiled by the apparent simplicity of this front-stage. For those working in NGOs, the idea of forming groups and working with groups has an inherent, emotive appeal. Vijay Mahajan, the founder of an earlier livelihood-based NGO in India, called Basix¹⁶, has this to say:

...in the first flush, it seems all so easy. Social forestry, for example, is far more difficult - one has to know how to raise saplings and survival rates become known only within a few months of planting. Here, 'all you have to do' is ask women to form a samuha (group), start tiny savings and the rest takes care of itself. This is a bit of a caricature but not far from reality.¹⁷

How difficult is it to organize a group? MYRADA was one of the first institutions that conducted trainings and exposure visits to SHGs. Their explicit focus was on "building institutions of the poor", by building up their self-confidence and critical awareness. Participatory Rural Appraisal (PRA) exercises were conducted to identify the poor families in the village. Once identified, the poor self-selected the members of their group on the basis of an affinity which pre-existed. Lathamala, one of the trainers at MYRADA, who was involved intensely in SHG formation and training of trainers had this to say about the initial days:

At that time how to start an SHG was a big thing. Home visits were an important element of our job. Our reporting format used to have a column for how many house visits we made. One field officer (we used to call them extension officers) had to make a maximum 15 house visits, minimum 10. The cost of SHG was also high at that time, because (the) idea was new.

The very concept of all-women groups and group meetings was itself novel. Lathamala again said: "We were targeting women, the women (themselves) were not coming out (of their homes)."¹⁸ We spoke with Jacintha, who led a Bangalore-based NGO called Sakti. Sakti was also into training women SHGs for savings. Jacintha told us about how her training modules for SHGs also revolved around transformation

and identifying leaders who could instill in women the importance of autonomy. Issues of gender, sexual harassment were a part and parcel of Sakthi training modules.¹⁹

Once the group emerged, the rules were framed by the members themselves. Lathamala was very careful to emphasize that the rules of the SHG cannot be framed in the first meeting"In the first meeting you ask them how many times do you want to meet, where do you want to meet - all that then become the rules." In MYRADA, the belief was that empowerment was triggered by the fact that no decisions are taken outside the group. The rules were also not cast in stone. Members were trained to record the minutes of their meeting and keep accounts of all savings and inter-lending transactions. Gradually, all of this were collated, from the group up into MYRADA's SHG training manuals. The MYRADA training comprised 14 modules of one to two years, where only one or at the most two SHGs were trained separately. The toughest training module according to Lathamala was explaining to members the concept of the interest rate on a loan. They often used role-plays and actual money to drive home this concept. She said that most SHG members had no idea of yearly interest rate, and were only used to paying interest daily, weekly, and sometimes monthly. Once they grasped the concept, "they were shocked to know that the interest rate they were paying (to the moneylender) was more than that paid by the TATAs and BIRLAs."²⁰ In that sense, the SHG was like a mini-bank.²¹ Aloysius Fernandez in fact went a step further to say that the SHGs were like the Facebook of the 80s and the 90s. Members knew each other and were clear to whom and why they were lending, and had intimate knowledge of her capability to repay.

Does this sanguine account obfuscate the issue of the SHG Bank-Linkage model's ability to tackle the "backstage" of the group - the caste/class fissures in rural India? Can it take on the politics around unequal distribution of distribution of power and resources, or does it merely replicate the status-quo? Though there have been sporadic instances of SHG women contesting local elections and taking on local level issues, Lathamala was frank in admitting that since the SHG groups were self-selected based on affinity, they would reflect the social reality around caste and class in the village.

There was a shift in this characterization of the front-stage, after 2000 due to two reasons: (a) The State got into SHG formation in a big way with a national level program - Swarnajayanti Gram Swarozgar Yojana (SGSY) scheme giving microenterprise loans to SHGs and subsidies to targeted groups based on caste/tribe identities: and (b) Grameen MFIs also started their group-lending activities. The Grameen groups in India could not take savings, so their focus was only on credit. shows the difference between the two groups.

Grameen groups were perceived by the members to be easier on training requirements. We spoke to Suresh, who had worked earlier with Jacintha's NGO Sakti and later joined an MFI. Suresh was sent to Bangladesh for exposure-training, by the MFI and he relates that the training of the groups among Indian MFIs was even less in comparison to the Bangladeshi MFI groups. The house-visits by the field staff were fewer.

Therefore, they had to seek unusual ways to get an idea about the borrowers' background, for example, did the borrower's home have photos of the borrower with politicians?²²

Setting of the front-stage - group characteristics of the two models

Setting is the physical layout and background items on which action takes place

SHG groups were mainly rural and were built to take advantage of India's vast bank network, but this model was seen to be unsuitable in sparsely populated areas or areas which saw heavy migration. Grameen MFIs, to begin with, were in urban and peri-urban regions in the southern states and later operated in those parts of country where bank branches were sparse. SHG groups came in flavors of all kinds, depending upon what each group decided and rotation of leadership was encouraged. Grameen MFI groups were homogenous. Thus, by design, due to the heterogeneity and the hand-holding needed for developing internal capacities, the rate of growth of SHGs could not be as fast as the Grameen MFI groups, a factor that needs to be taken into account

The other key difference was savings. Savings were the key to the SHG model. Savings and group inter- lending would go on for 6 months before they could be linked to a bank. In Lathamala's words:

We used to make a nataka (play) out of it. 'You keep one rupee in the sasve/jeerige dabba (spices container). Your husband will come and beat you and take it. Maybe your husband is good, next day some relative will come and you yourself will take it out to purchase tea powder. Where is the place to save?

The story of savings is a complex one. While it inculcated the savings habit among SHG members and even linked their savings to bank deposits, fixing savings often resulted in exclusion of the very poor. The Grameen MFI model had no compulsory savings and according to David Gibbons, who started the MFI Cashpor ²³ in one of the poorest states of India - Bihar, is of the opinion that the SHG model actually ended up benefiting the non-poor more. Lathamala also agrees that when she revisits the areas she worked in, she sees that the very poor and indigent, migrants and the physically disabled people are left out.

Group - the front-stage or a 'front'?

Front, then is the expressive equipment of a standard kind intentionally or unwittingly employed by an individual during his performance

The group was the front-stage for both the models. The SHG Bank-Linkage model began with the groups being the community-based organizations to inculcate financial autonomy among women. For the Grameen MFI model, the group was the social capital on the basis of which they could lend to the poor. How much was the group merely a front for lending that was actually being targeted at individuals? In the Grameen Model, lending was to individuals within the setting of a group. Their design included features like staggered lending within the group (loans given to 2:2:1 rota order to the 5 members of the group), dynamic incentives (carrots to individuals in the form of 'top-up' loans and sticks in the form of penalties for late payments) which were highly individual-focused. In the SHG Bank-Linkage model, the characteristic of the group changed with the entry of the State. The SGSY mission, which in the State of Karnataka was called Stree Shakti (Women Power) began the process of splitting existing groups. State subsidies were targeted at individuals belonging to a specific caste (SC/ST), or class (below poverty line (BPL)) or tribes for provision of state subsidies. According to Lathamala:

Stree Shakti groups - people started calling them 'Government SHGs'. Many of our groups thought if they were Government SHGs, and who were we? And why were we not (Government SHGs)?

State mandates came with targets. When the government is operating with targets of X number of SHGs at the end of a financial year, the first item that flew out of the window was training. Lathamala recalls a well- meaning Government Officer questioning the need for so much training. "'Why so many days on training? One day (training) should do' he said". Initially, the government paid NGOs money for capacity building and other activities, later it relied on its own line-functionaries like anganwadi²⁴ workers in the villages to form groups. Many groups were formed simply on the promises of doles and subsidies. There is evidence that Stree Shakti groups in North Karnataka were severely hampered by poorly trained, poorly motivated anganwadi workers on one hand and the pressure applied by local dominant class politicians.²⁵ Politics entered the SHG system, as Suresh succinctly puts it:

Politicians started interfering. They funded SHGs for votes - this still happens today - it is seen as a potential vote bank. Once party politics entered there was dissatisfaction among workers.

There was a distortion in the original concept of self-help and affinity and SHGs were captured by the local elite. The group in many instances was merely a carapace and the show was being run by the ring-leaders within the group.

It is in this scenario that the entry of the MFIs - another source of group loans - has to be analyzed. It was not difficult for MFIs to target the disgruntled Stree Shakti SHG members and offer them loans. There were many who were left out of the SHG Bank-Linkage system, whom the MFIs did not hesitate to solicit. For the MFIs, the fixed costs of group-formation and group-recognition were very low, because according to Suresh, for SHG women, the concept of a forming a sangha (group) for getting saala (loan) was implanted deep in their subconscious.

This brings us to our original question of whether the globally attuned Grameen MFI groups, gobbled up the local SHG Bank-Linkage groups. While it was easy for MFIs to tackle dysfunctional SHG members, it was also a fact that SHGs did leave out the truly poor and indigent. MFIs also used the staff and groups of a well-oiled SHG machinery to lend more to the functional SHG groups. Over a period of a decade (that corresponded with the opening up of the Indian economy), there was an increase both in people's aspirations and their capacity to take on debt. Lathamala again said:

Because of the SHGs, members' capacity to take loans and to take risks had increased. In the SHGs, pretty much like your business school, all talk and discussion was around starting business, marketing and selling. Along the way they realised they could deal with more and bigger loans.

The shift from the group to the individual was already in the making.

THE "BACK-STAGE" OF THE TWO MODELS - THE ORGANIZATIONS, THEIR LENDERS, AND THE STATE

Having an analogous front-stage, however, their "back-stage" could not have been more different. The SHG Bank-Linkage model in India was a state bureaucracy (NABARD) facilitated model, borne out of a deep sense of frustration over the failure of several attempts of the State to bring the poor into the fold of formal credit. This had advantages as well as disadvantages. NABARD played a key role in its up-take with banks. Aloysius Fernandez recalled a former Chief General Manager of NABARD while addressing bankers, even offering to place his personal provident fund as guarantee for loans given by them to the SHGs. Having tasted some success, the State went on to scaling this up and "mainstreaming" the SHG agenda. Complicating this analysis was the role of international agencies like World Bank and IMF, which were clued on into State policies due to the SAPs (Structural Adjustment Programs), which they mandated in several countries of the global south, including India. Curbing fiscal deficits was an inherent directive of the SAPs and budgets on several programs relating to poverty alleviation and safety nets were cut. In 1988, the then President of the World Bank, stated that the World Bank intended to "reassert and expand its role in the attack on poverty through a targeted program focused on eradicating the worst forms of poverty"

through its involvement with NGOs, poverty programs, women's programs, and micro-enterprises.²⁶ Funds began flowing from these bodies to the State on conditionalities that they should partner directly with NGOs and Community-Based Organizations. Community-based programs disbursing credit came to be seen as a cost-effective way to attain the goal of alleviating poverty and diffusing social dissent.²⁷ The oft cited example is that of the Indian state of Andhra Pradesh, which had a massive World Bank project called Velugu (Light) around creation of SHGs. Most features of the SHG Bank-Linkage model were scaled down or discarded. SHGs were in Aloysius Fernandes' words, "co-opted into the government delivery system". Training was reduced to a one-day affair to a large gathering addressed by politicians.

The co-opting of the SHG movement by the State, led to several fly-by-night NGOs and many NGOs of good repute realizing that credit was a good entry-point. Deep Joshi, an Executive Director with another long-standing NGO called PRADAN²⁸ recalls an old Gandhian Sarvodaya leader telling him that

he had tried all kinds of things for 25 years, from khadi spinning ...to balwadis (children- groups), but nothing produces such concrete results and sustained interest among the beneficiaries as microfinance. He had lately been promoting women's Self Help Groups (SHGs) and finds great enthusiasm among women who are flocking to his NGO for inclusion.²⁹

The entry of the Grameen MFI Model meant that NGOs found the option of doing away with bank-linkage and becoming lenders themselves. However, in the process, training, re-tooling, and upgradation of trainers were not given their due importance. Was the objective to critically engage with, and empower SHG members lost? The other question here is whether NGOs would have been capable of tackling microfinance activities, transforming themselves from facilitators/enablers to becoming lenders. Several NGOs saw microfinance as an idea that worked and was able to get them funds. According to Vijay Mahajan, "Most NGOs did not see that this role if it had to be played seriously, needed changes in their attitudes, competencies and systems." According to Aloysius Fernandez, morphing an NGO into an MFI was self- defeating. "Turning an NGO into a MFI is asking a banana tree to produce coconuts". MYRADA therefore promoted a separate legal entity, a not-for-profit company called Sanghamitra (Friend of Groups) to lend to its SHGs. But what about the not-so-big NGOs that did not have this capability?

The 'dark secrets' of the two models - Investors in microfinance

Dark secrets: Facts which are concealed and are incompatible with the frontstage image maintained before an audience.

By 2005 (International Year of Microcredit), the entry of several mainstream global lenders into this field took care of the problem of funding. Leyshon and Thrift ³⁰ talk of this as the intersection between global finance and level of the everyday and mundane. It is an unceasing search of global capital to suss out streams of incomes by which it could diversify and atomize its risks.³¹ Consultative Group to Assist the Poorest (the CGAP), a global multi-donor initiative, housed in the World Banks Finance and Private Sector Development Vice Presidency had been established in 1995. The CGAP has a specific mandate to address and develop in formal, legal terms the relationship between micro-level credit schemes, macro-level financial sector policy, and the global financial liberalization agenda. This was in line with the ideology being propagated that the poor should boot-strap their way out of poverty and should not be provided doles.³² Commercialization of microfinance in India took the route of several for-profit NBFCs taking to the Grameen Model, backed not just by local investors and banks but also by global social and mainstream investors. They were willing to put funds into this sector, but these funds came with their own mainstream logic of hard-nosed financial ratios and break-even analyses. Further, within this sector, the standardized Grameen MFI model with its ability to scale-up received most of the funding. Exhibit 2 provides a list of Investors in this sector in 2009-2010. Funds thus were being disbursed by an organization rooted in the community but managed by distant foreign investors. After Compartamos,³³ the hush-hush talk among Indian MFIs of valuations, Initial Public Offerings (IPOs), and securitization³⁴ became the Goffmanian 'dark secrets'. 'Profiteering' and not profits was the goal, with global investors benefiting at the expense of the poor.³⁵ It could not have been more dissonant from the frontstage. Academic research work, media, and experts could be lured to "provide an aura of thought and respectability".³⁶ With credit rating of MFIs and their entry into public listing in stock-market, credit bureaus with credit scoring tools and online platforms like MIX had entered this sector. By then, the Indian economy was seen to be 'rising' and traditional aid- funding to India through bi-lateral sources and donor agencies had also dried up. Jacintha who was running Sakti decided that it was time to give up and not adopt that route. She says she was lucky to find an MFI that was willing to take on her well-trained staff. It was not a coincidence that this MFI was started by an ex-global banker.

Derisive collusion' in the back-stage: the role of Indian banks

Derisive colluder: the show he puts on is only a show...

Banks in India were made to take on the task of linking SHGs via the SHG Bank-Linkage model. NABARD spearheaded their initiation by earmarking funds for exposure-training to bank officials, making SHG

lending a part of the Priority Sector Lending (PSL)³⁷ and was committed to refinancing them. MYRADA conducted several rounds of such training modules, according to Lathamala "using data from our groups and their own terminology". The only way banks could be convinced was by seeing this as a business opportunity, much like the global investors, "fortune at the bottom of the pyramid".³⁸ It was not easy, and according to Lathamala, no amount of class-room training convinced the bankers about the sustainability of this model. Lending to SHGs was part of their mandated, Priority Sector Lending. While some proactive bankers were enthusiastic about it, transfers brought in a new set, on whom the SHGs had to work on, anew.³⁹ With the kicking in of the Basel norms in the late 1990s to tackle risk, bank lending to the unorganized, rural producers further shrunk.⁴⁰ Banks could fulfill their PSL mandates by lending directly to the MFIs, which lent to groups. Several innovations with regard to having the group loans on/off their balance-sheets were tried. This derisive collusion was, in a way, ended in 2016, with the Indian State deciding to issue new Small Finance Bank licenses and 10 of the 11 entities who obtained the license were for-profit MFIs.

CONCLUDING SCENES AND THE DENOUEMENT

Scenes: that arise to destroy or seriously threaten the polite appearance of consensus (...) The previous and expected interplay between teams is suddenly forced aside and a new drama forcibly takes its place.

This Goffmanian dramaturgical account between the front-stage and backstage in this Indian microfinance tale will not be complete without recounting the "scenes". We are referring to the repayment crises that struck this sector around 2009 and 2010 in several districts of Karnataka and Andhra Pradesh. There have been many accounts of the crises both in the media and academic literature.⁴¹ Suresh, who was caught in the thick of crisis, said that that the pressure to form groups and expand lending took its toll. The time spent in carrying out financial transactions was far more in MFI group meetings, as compared to SHG group meetings. For the MFI field staff, the center meetings took most of their time and there was no time left for verifications, checks, or due-diligence. Suresh recounts being asked by the community leaders, "you are giving money but where was the checking process? Where is your verification? Have you done the house visit?". The crisis did force MFIs to set self-regulatory norms in place.

This Indian microfinance tale began with the two microfinance models, and a question as to whether the global model had gobbled up the local model. The answer to this question is complicated and in parsing this tale, we realized that it raised more questions. While MFI groups did supplant SHG groups, were they themselves caught in a dysfunctional state mandate to scale up? To that extent, were the MFIs filling in the interstices of the SHG Bank-LinkINTRODUCTION TO THE TWO MODELS OF MICROFINANCE IN INDIA

Within a span of two decades, India has witnessed a stupendous rise and an equally prodigious fall of microfinance as a tool of development. Microfinance conjures up a typical group-based mechanism of providing loans to the poor and those excluded from the formal lending channels. This was pioneered by the Nobel Prize Winning Muhammad Yunus in Bangladesh through his Grameen microfinance (Grameen MFI) model which had a world-wide reach. In India, the Grameen MFI Model made inroads in early 2000, primarily in the four southern states of India. Its trajectory has been widely cataloged which includes its massive spread, increasing commercialization, the endemic crises that plagued it in late 2000 and the aftermath of the crises.¹ In the Indian context, what is less known is that the Grameen model made these inroads in a setting where there was an extensive network of a pre-existing locally developed group lending model, called the Self-Help Group Bank Linkage (SHG Bank Linkage) model. In 2019, the Indian microfinance story stood at a crucial juncture with respect to these two models. The SHG Bank Linkage model, while being recognized as a key player in changing the financial inclusion discourse in India, was no longer salient in the existing financial inclusion narratives. Grameen MFIs on the other hand, were on their way to being "mainstreamed" as banks and seen as key players in the financial inclusion narratives, along the lines of Grameen Bank in Bangladesh.

Since both are group-based models of microfinance that overlapped temporally and geographically, the two models are often compared and contrasted by scholars and policy makers.² Votaries of the SHG-Bank Linkage model emphasize its indigenous design to suit diverse, local conditions, its emphasis on savings, and its community roots.³ This was seen as a decentralized model that tapped into the vast bank-network of India. The MFI model in contrast was the more lean, homogenous, and centralized model, built for scale. ⁴ It was able to peg itself quite firmly in the global financial architecture, early on, owing to the post-90s opening-up of the Indian economy. Commercial Grameen MFIs dealt in complex financial products around risk management, thus exposing it to the risks of cowboy financialization resulting in cycles of intense growth followed by default crises.⁵ In these contrasting growth trajectories of the two group-based models, it is often surmised that the more globally attuned model ended up gobbling the inefficient and clunky local.⁶ The Grameen MFI model first made inroads in those parts of India where there was an extensive network of pre-existing self-help groups. It is also a fact that the more renowned Grameen model, through the process of financialization in an increasingly globalized India, was able to attract international investment that pummeled its expansion.⁷

This case catalogs an opportunity of critically studying two models, both group-based, both offering microcredit to women borrowers, to understand the specific factors that were responsible for their differing trajectories. Despite both, in principle, adhering to group lending, how different were their group processes

- group formation, group meetings, and group-member interactions? What were the historical factors that went into their different designs? What were the institutional mechanisms that made them different not only with regard to their lending and expansion strategies, but also in their interaction with other stakeholders in this space - primarily investors, regulators, and the state.

HISTORICAL BACKDROP OF THE TWO MODELS

The genesis of Muhammad Yunus' Grameen MFI model is well-documented.⁸ In India, the homegrown SHG Bank Linkage model was the forerunner to the Grameen MFI model. It was triggered by a failure of formal credit, both bank-based and cooperative-based to reach the poor. The search for a new model of rural finance was led by the National Bank for Agriculture and Rural Development (NABARD), India's apex bank in charge of rural development. In 1986, NABARD was approached by MYRADA,⁹ a non- governmental organization (NGO) working in backward and drought-prone areas of Karnataka, with a proposal to support the formation of an alternate model of credit provision to the poor, with the help of some 300 informal credit management groups that had emerged in its project areas. These all-women saving groups had emerged as an offshoot of the failure of the state's co-operative credit societies in the areas where MYRADA was working. In 1987, after several field trials, NABARD gave MYRADA a sum of Rs.

1 million¹⁰ to train the groups and match their savings. The groups were called Self-Help Groups (SHGs) at NABARD's request. Emphasizing self-help, they were largely homogeneous in terms of caste and activity, building a common fund from very small regular savings and interest income, and lending to their members for periods of 1-3 months at 2-3% interest per month. Recovery of these loans was excellent, and impacts, however small, were felt, ranging from emergency assistance to release from bonded labor.¹¹ Between 1989 and 1991, NABARD entered into a policy dialogue with the Reserve Bank of India (RBI), India's Central Bank, to prepare for a pilot project linking informal groups to banks.¹² The SHG Bank Linkage Program was initiated by RBI with its circular on January 4, 1993 (DBOD.No.BC.63/13:01:08/92- 93):

"... such Self-Help Groups, registered or unregistered, may be allowed to open Savings Bank Accounts with banks.".

This circular was later followed by a seven-page memo by NABARD to all bank chairpersons in the country allowing banks to lend one bulk loan to unregistered SHGs, without collateral, provided the SHGs kept records of their internal savings, loans, and minutes of meetings. This was an innovation in its time, because bankers for the first time, were allowed to deviate from their standard loan management practices to advance a bulk loan to unregistered SHGs. Beginning 1992, MYRADA was involved in the training and sensitization of bankers, and dissemination of the SHG Bank-Linkage model. A large number of officers of NABARD, banks, and other NGOs were sent to MYRADA for exposure training. NABARD proudly celebrated the 25^th anniversary of the SHG Bank-Linkage model in July 2017.

The success of SHG groups attracted the attention of a wide range of players - including the state. After 2000, India started seeing the entry of the Grameen MFI model, beginning in the southern states of India. The SHG Bank-Linkage model had by then, a good eight-year run in these states. Called as the second wave of microfinance, it had variegated structures. It was led mainly by the for-profit Non-banking financial Companies (NBFCs), which in India, are restricted by law from taking deposits and acting like banks. Despite crises, this industry had in the last decade or so, seen one of the highest growth rates in the country by 2019.

Not many are aware of these two distinct phases of the Indian microfinance story. Aloysius Fernandez who was the Executive Director of MYRADA at that time¹³ and seen as the brain behind the SHG Bank-Linkage model, elucidates on one of the reasons, "most analysts and journalists have entered this "arena" rather late - around 2000-2005."¹⁴ It was also during this phase that the term "financial inclusion" came to be widely used and microfinance became the development buzzword.

THE "FRONT-STAGE" OF THE TWO MODELS - THE GROUP

Microfinance revolves around the "group". It could a samuh/sangha/mandal/dal/goshthi¹⁵ of the SHG Bank-Linkage model or the ubiquitous center of the Grameen MFI model - groups of women sitting together either in circle, or in rows. Our starting point is this "group". Building on the dramaturgical approach of Erving Goffman (1922-1982), who analyzed social interaction much like actors on a stage, we argue that both these models portray the group as their "front-stage". Both the Grameen MFI model and the SHG Bank Linkage model are based on group lending and construe the group to be this public space in which borrowers are serviced. The group is a constructed space which is their public face, where they carry out their task of loan disbursements and collection of repayments, fees, savings or other charges.

It is easy to be beguiled by the apparent simplicity of this front-stage. For those working in NGOs, the idea of forming groups and working with groups has an inherent, emotive appeal. Vijay Mahajan, the founder of an earlier livelihood-based NGO in India, called Basix¹⁶, has this to say:

...in the first flush, it seems all so easy. Social forestry, for example, is far more difficult - one has to know how to raise saplings and survival rates become known only within a few months of planting. Here, 'all you have to do' is ask women to form a samuha (group), start tiny savings and the rest takes care of itself. This is a bit of a caricature but not far from reality.¹⁷

How difficult is it to organize a group? MYRADA was one of the first institutions that conducted trainings and exposure visits to SHGs. Their explicit focus was on "building institutions of the poor", by building up their self-confidence and critical awareness. Participatory Rural Appraisal (PRA) exercises were conducted to identify the poor families in the village. Once identified, the poor self-selected the members of their group on the basis of an affinity which pre-existed. Lathamala, one of the trainers at MYRADA, who was involved intensely in SHG formation and training of trainers had this to say about the initial days:

At that time how to start an SHG was a big thing. Home visits were an important element of our job. Our reporting format used to have a column for how many house visits we made. One field officer (we used to call them extension officers) had to make a maximum 15 house visits, minimum 10. The cost of SHG was also high at that time, because (the) idea was new.

The very concept of all-women groups and group meetings was itself novel. Lathamala again said: "We were targeting women, the women (themselves) were not coming out (of their homes)."¹⁸ We spoke with Jacintha, who led a Bangalore-based NGO called Sakti. Sakti was also into training women SHGs for savings. Jacintha told us about how her training modules for SHGs also revolved around transformation

and identifying leaders who could instill in women the importance of autonomy. Issues of gender, sexual harassment were a part and parcel of Sakthi training modules.¹⁹

Once the group emerged, the rules were framed by the members themselves. Lathamala was very careful to emphasize that the rules of the SHG cannot be framed in the first meeting"In the first meeting you ask them how many times do you want to meet, where do you want to meet - all that then become the rules." In MYRADA, the belief was that empowerment was triggered by the fact that no decisions are taken outside the group. The rules were also not cast in stone. Members were trained to record the minutes of their meeting and keep accounts of all savings and inter-lending transactions. Gradually, all of this were collated, from the group up into MYRADA's SHG training manuals. The MYRADA training comprised 14 modules of one to two years, where only one or at the most two SHGs were trained separately. The toughest training module according to Lathamala was explaining to members the concept of the interest rate on a loan. They often used role-plays and actual money to drive home this concept. She said that most SHG members had no idea of yearly interest rate, and were only used to paying interest daily, weekly, and sometimes monthly. Once they grasped the concept, "they were shocked to know that the interest rate they were paying (to the moneylender) was more than that paid by the TATAs and BIRLAs."²⁰ In that sense, the SHG was like a mini-bank.²¹ Aloysius Fernandez in fact went a step further to say that the SHGs were like the Facebook of the 80s and the 90s. Members knew each other and were clear to whom and why they were lending, and had intimate knowledge of her capability to repay.

Does this sanguine account obfuscate the issue of the SHG Bank-Linkage model's ability to tackle the "backstage" of the group - the caste/class fissures in rural India? Can it take on the politics around unequal distribution of distribution of power and resources, or does it merely replicate the status-quo? Though there have been sporadic instances of SHG women contesting local elections and taking on local level issues, Lathamala was frank in admitting that since the SHG groups were self-selected based on affinity, they would reflect the social reality around caste and class in the village.

There was a shift in this characterization of the front-stage, after 2000 due to two reasons: (a) The State got into SHG formation in a big way with a national level program - Swarnajayanti Gram Swarozgar Yojana (SGSY) scheme giving microenterprise loans to SHGs and subsidies to targeted groups based on caste/tribe identities: and (b) Grameen MFIs also started their group-lending activities. The Grameen groups in India could not take savings, so their focus was only on credit.

Grameen groups were perceived by the members to be easier on training requirements. We spoke to Suresh, who had worked earlier with Jacintha's NGO Sakti and later joined an MFI. Suresh was sent to Bangladesh for exposure-training, by the MFI and he relates that the training of the groups among Indian MFIs was even less in comparison to the Bangladeshi MFI groups. The house-visits by the field staff were fewer.

Therefore, they had to seek unusual ways to get an idea about the borrowers' background, for example, did the borrower's home have photos of the borrower with politicians?²²

Setting of the front-stage - group characteristics of the two models

Setting is the physical layout and background items on which action takes place

SHG groups were mainly rural and were built to take advantage of India's vast bank network, but this model was seen to be unsuitable in sparsely populated areas or areas which saw heavy migration. Grameen MFIs, to begin with, were in urban and peri-urban regions in the southern states and later operated in those parts of country where bank branches were sparse. SHG groups came in flavors of all kinds, depending upon what each group decided and rotation of leadership was encouraged. Grameen MFI groups were homogenous. Thus, by design, due to the heterogeneity and the hand-holding needed for developing internal capacities, the rate of growth of SHGs could not be as fast as the Grameen MFI groups, a factor that needs to be taken into account

The other key difference was savings. Savings were the key to the SHG model. Savings and group inter- lending would go on for 6 months before they could be linked to a bank. In Lathamala's words:

We used to make a nataka (play) out of it. 'You keep one rupee in the sasve/jeerige dabba (spices container). Your husband will come and beat you and take it. Maybe your husband is good, next day some relative will come and you yourself will take it out to purchase tea powder. Where is the place to save?

The story of savings is a complex one. While it inculcated the savings habit among SHG members and even linked their savings to bank deposits, fixing savings often resulted in exclusion of the very poor. The Grameen MFI model had no compulsory savings and according to David Gibbons, who started the MFI Cashpor ²³ in one of the poorest states of India - Bihar, is of the opinion that the SHG model actually ended up benefiting the non-poor more. Lathamala also agrees that when she revisits the areas she worked in, she sees that the very poor and indigent, migrants and the physically disabled people are left out.

Group - the front-stage or a 'front'?

Front, then is the expressive equipment of a standard kind intentionally or unwittingly employed by an individual during his performance

The group was the front-stage for both the models. The SHG Bank-Linkage model began with the groups being the community-based organizations to inculcate financial autonomy among women. For the Grameen MFI model, the group was the social capital on the basis of which they could lend to the poor. How much was the group merely a front for lending that was actually being targeted at individuals? In the Grameen Model, lending was to individuals within the setting of a group. Their design included features like staggered lending within the group (loans given to 2:2:1 rota order to the 5 members of the group), dynamic incentives (carrots to individuals in the form of 'top-up' loans and sticks in the form of penalties for late payments) which were highly individual-focused. In the SHG Bank-Linkage model, the characteristic of the group changed with the entry of the State. The SGSY mission, which in the State of Karnataka was called Stree Shakti (Women Power) began the process of splitting existing groups. State subsidies were targeted at individuals belonging to a specific caste (SC/ST), or class (below poverty line (BPL)) or tribes for provision of state subsidies. According to Lathamala:

Stree Shakti groups - people started calling them 'Government SHGs'. Many of our groups thought if they were Government SHGs, and who were we? And why were we not (Government SHGs)?

State mandates came with targets. When the government is operating with targets of X number of SHGs at the end of a financial year, the first item that flew out of the window was training. Lathamala recalls a well- meaning Government Officer questioning the need for so much training. "'Why so many days on training? One day (training) should do' he said". Initially, the government paid NGOs money for capacity building and other activities, later it relied on its own line-functionaries like anganwadi²⁴ workers in the villages to form groups. Many groups were formed simply on the promises of doles and subsidies. There is evidence that Stree Shakti groups in North Karnataka were severely hampered by poorly trained, poorly motivated anganwadi workers on one hand and the pressure applied by local dominant class politicians.²⁵ Politics entered the SHG system, as Suresh succinctly puts it:

Politicians started interfering. They funded SHGs for votes - this still happens today - it is seen as a potential vote bank. Once party politics entered there was dissatisfaction among workers.

There was a distortion in the original concept of self-help and affinity and SHGs were captured by the local elite. The group in many instances was merely a carapace and the show was being run by the ring-leaders within the group.

It is in this scenario that the entry of the MFIs - another source of group loans - has to be analyzed. It was not difficult for MFIs to target the disgruntled Stree Shakti SHG members and offer them loans. There were many who were left out of the SHG Bank-Linkage system, whom the MFIs did not hesitate to solicit. For the MFIs, the fixed costs of group-formation and group-recognition were very low, because according to Suresh, for SHG women, the concept of a forming a sangha (group) for getting saala (loan) was implanted deep in their subconscious.

This brings us to our original question of whether the globally attuned Grameen MFI groups, gobbled up the local SHG Bank-Linkage groups. While it was easy for MFIs to tackle dysfunctional SHG members, it was also a fact that SHGs did leave out the truly poor and indigent. MFIs also used the staff and groups of a well-oiled SHG machinery to lend more to the functional SHG groups. Over a period of a decade (that corresponded with the opening up of the Indian economy), there was an increase both in people's aspirations and their capacity to take on debt. Lathamala again said:

Because of the SHGs, members' capacity to take loans and to take risks had increased. In the SHGs, pretty much like your business school, all talk and discussion was around starting business, marketing and selling. Along the way they realised they could deal with more and bigger loans.

The shift from the group to the individual was already in the making.

THE "BACK-STAGE" OF THE TWO MODELS - THE ORGANIZATIONS, THEIR LENDERS, AND THE STATE

Having an analogous front-stage, however, their "back-stage" could not have been more different. The SHG Bank-Linkage model in India was a state bureaucracy (NABARD) facilitated model, borne out of a deep sense of frustration over the failure of several attempts of the State to bring the poor into the fold of formal credit. This had advantages as well as disadvantages. NABARD played a key role in its up-take with banks. Aloysius Fernandez recalled a former Chief General Manager of NABARD while addressing bankers, even offering to place his personal provident fund as guarantee for loans given by them to the SHGs. Having tasted some success, the State went on to scaling this up and "mainstreaming" the SHG agenda. Complicating this analysis was the role of international agencies like World Bank and IMF, which were clued on into State policies due to the SAPs (Structural Adjustment Programs), which they mandated in several countries of the global south, including India. Curbing fiscal deficits was an inherent directive of the SAPs and budgets on several programs relating to poverty alleviation and safety nets were cut. In 1988, the then President of the World Bank, stated that the World Bank intended to "reassert and expand its role in the attack on poverty through a targeted program focused on eradicating the worst forms of poverty"

through its involvement with NGOs, poverty programs, women's programs, and micro-enterprises.²⁶ Funds began flowing from these bodies to the State on conditionalities that they should partner directly with NGOs and Community-Based Organizations. Community-based programs disbursing credit came to be seen as a cost-effective way to attain the goal of alleviating poverty and diffusing social dissent.²⁷ The oft cited example is that of the Indian state of Andhra Pradesh, which had a massive World Bank project called Velugu (Light) around creation of SHGs. Most features of the SHG Bank-Linkage model were scaled down or discarded. SHGs were in Aloysius Fernandes' words, "co-opted into the government delivery system". Training was reduced to a one-day affair to a large gathering addressed by politicians.

The co-opting of the SHG movement by the State, led to several fly-by-night NGOs and many NGOs of good repute realizing that credit was a good entry-point. Deep Joshi, an Executive Director with another long-standing NGO called PRADAN²⁸ recalls an old Gandhian Sarvodaya leader telling him that

he had tried all kinds of things for 25 years, from khadi spinning ...to balwadis (children- groups), but nothing produces such concrete results and sustained interest among the beneficiaries as microfinance. He had lately been promoting women's Self Help Groups (SHGs) and finds great enthusiasm among women who are flocking to his NGO for inclusion.²⁹

The entry of the Grameen MFI Model meant that NGOs found the option of doing away with bank-linkage and becoming lenders themselves. However, in the process, training, re-tooling, and upgradation of trainers were not given their due importance. Was the objective to critically engage with, and empower SHG members lost? The other question here is whether NGOs would have been capable of tackling microfinance activities, transforming themselves from facilitators/enablers to becoming lenders. Several NGOs saw microfinance as an idea that worked and was able to get them funds. According to Vijay Mahajan, "Most NGOs did not see that this role if it had to be played seriously, needed changes in their attitudes, competencies and systems." According to Aloysius Fernandez, morphing an NGO into an MFI was self- defeating. "Turning an NGO into a MFI is asking a banana tree to produce coconuts". MYRADA therefore promoted a separate legal entity, a not-for-profit company called Sanghamitra (Friend of Groups) to lend to its SHGs. But what about the not-so-big NGOs that did not have this capability?

The 'dark secrets' of the two models - Investors in microfinance

By 2005 (International Year of Microcredit), the entry of several mainstream global lenders into this field took care of the problem of funding. Leyshon and Thrift ³⁰ talk of this as the intersection between global finance and level of the everyday and mundane. It is an unceasing search of global capital to suss out streams of incomes by which it could diversify and atomize its risks.³¹ Consultative Group to Assist the Poorest (the CGAP), a global multi-donor initiative, housed in the World Banks Finance and Private Sector Development Vice Presidency had been established in 1995. The CGAP has a specific mandate to address and develop in formal, legal terms the relationship between micro-level credit schemes, macro-level financial sector policy, and the global financial liberalization agenda. This was in line with the ideology being propagated that the poor should boot-strap their way out of poverty and should not be provided doles.³² Commercialization of microfinance in India took the route of several for-profit NBFCs taking to the Grameen Model, backed not just by local investors and banks but also by global social and mainstream investors. They were willing to put funds into this sector, but these funds came with their own mainstream logic of hard-nosed financial ratios and break-even analyses. Further, within this sector, the standardized Grameen MFI model with its ability to scale-up received most of the funding. provides a list of Investors in this sector in 2009-2010. Funds thus were being disbursed by an organization rooted in the community but managed by distant foreign investors. After Compartamos,³³ the hush-hush talk among Indian MFIs of valuations, Initial Public Offerings (IPOs), and securitization³⁴ became the Goffmanian 'dark secrets'. 'Profiteering' and not profits was the goal, with global investors benefiting at the expense of the poor.³⁵ It could not have been more dissonant from the frontstage. Academic research work, media, and experts could be lured to "provide an aura of thought and respectability".³⁶ With credit rating of MFIs and their entry into public listing in stock-market, credit bureaus with credit scoring tools and online platforms like MIX had entered this sector. By then, the Indian economy was seen to be 'rising' and traditional aid- funding to India through bi-lateral sources and donor agencies had also dried up. Jacintha who was running Sakti decided that it was time to give up and not adopt that route. She says she was lucky to find an MFI that was willing to take on her well-trained staff. It was not a coincidence that this MFI was started by an ex-global banker.

Derisive collusion' in the back-stage: the role of Indian banks

Derisive colluder: the show he puts on is only a show...

Banks in India were made to take on the task of linking SHGs via the SHG Bank-Linkage model. NABARD spearheaded their initiation by earmarking funds for exposure-training to bank officials, making SHG

lending a part of the Priority Sector Lending (PSL)³⁷ and was committed to refinancing them. MYRADA conducted several rounds of such training modules, according to Lathamala "using data from our groups and their own terminology". The only way banks could be convinced was by seeing this as a business opportunity, much like the global investors, "fortune at the bottom of the pyramid".³⁸ It was not easy, and according to Lathamala, no amount of class-room training convinced the bankers about the sustainability of this model. Lending to SHGs was part of their mandated, Priority Sector Lending. While some proactive bankers were enthusiastic about it, transfers brought in a new set, on whom the SHGs had to work on, anew.³⁹ With the kicking in of the Basel norms in the late 1990s to tackle risk, bank lending to the unorganized, rural producers further shrunk.⁴⁰ Banks could fulfill their PSL mandates by lending directly to the MFIs, which lent to groups. Several innovations with regard to having the group loans on/off their balance-sheets were tried. This derisive collusion was, in a way, ended in 2016, with the Indian State deciding to issue new Small Finance Bank licenses and 10 of the 11 entities who obtained the license were for-profit MFIs.

CONCLUDING SCENES AND THE DENOUEMENT

Scenes: that arise to destroy or seriously threaten the polite appearance of consensus (...) The previous and expected interplay between teams is suddenly forced aside and a new drama forcibly takes its place.

This Goffmanian dramaturgical account between the front-stage and backstage in this Indian microfinance tale will not be complete without recounting the "scenes". We are referring to the repayment crises that struck this sector around 2009 and 2010 in several districts of Karnataka and Andhra Pradesh. There have been many accounts of the crises both in the media and academic literature.⁴¹ Suresh, who was caught in the thick of crisis, said that that the pressure to form groups and expand lending took its toll. The time spent in carrying out financial transactions was far more in MFI group meetings, as compared to SHG group meetings. For the MFI field staff, the center meetings took most of their time and there was no time left for verifications, checks, or due-diligence. Suresh recounts being asked by the community leaders, "you are giving money but where was the checking process? Where is your verification? Have you done the house visit?". The crisis did