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Microfinance for the marginalized: The impact of the Rojiroti approach in India

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Abstract

The Rojiroti approach to microfinance involves creation of women's self-help groups (SHGs), rotated loans from savings, and subsequent credit from CPSL, a Bihar-based NGO. Rojiroti serves customers who are significantly poorer and more marginalized than those typically served by microfinance (MF) in India. In the data analysed, more than 90 per cent of members are from scheduled caste and tribes (62 per cent) or other disadvantaged castes. This paper analyses the impact of Rojiroti MF using panel data on 740 new SHG members and 340 women in matched control sites at baseline and after 18 months. We consider changes in assets, children's education, empowerment, and domestic violence among other indicators. These results show significant gains for Rojiroti borrowers relative to control sites for important, but not all, variables. Comparison with more long-standing SHGs (at least 36 months) helps to explain how the borrowing patterns of poor and marginalized SHG members evolves.
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... Previous research with Rojiroti found that there were positive impacts on women's lives in relation to increased assets and reductions in domestic violence with the results being attributed to some of Rojiroti's operating mechanisms (Yaron, Gordon, Best & Choudhary, 2018). This study seeks to build on the gap in the literature on the impact of microfinance on girls' education specifically, whilst examining the Rojiroti's specific operating mechanisms to understand why change might occur. ...
... If a scheduled repayment cannot be made, the borrower has to repay the interest component plus at least one rupee of the initial loan. The strong relationships between members and communitybased group facilitators and the very high cost of alternative sources of credit make defaults extremely rare (Yaron et al., 2018), and the flexibility in timespan of loan repayment makes this process more feasible for members. The fact that Rojiroti delivers microfinance in a way that is cognisant of the different needs of its members is perhaps one of its most important features. ...
... A previous study looking at Rojiroti microfinance and its influence on the most marginalised found that women experienced increased asset accumulation and improvements in household property (Yaron et al., 2018). This has also been noted in other studies of microfinance (Deininger & Liu, 2009). ...
Thesis
Microfinance, the idea of giving small loans to those without access to formalised financial services, has been a widely adopted intervention since the 1990s. However, debates about the impacts of microfinance are ongoing and arguably intensifying. Critics argue that many of the mechanisms through which microfinance is delivered can lead to higher levels of poverty. Additionally, the fact that microfinance predominantly focuses on women has led to widespread feminist critiques that it does not consider wider structural constraints facing women. Increasingly, there have been calls to better understand the mechanisms through which microfinance organisations operate. This research explores Rojiroti microfinance, a grassroots and community-led organisation, designed by and for its members to support women from the most socio-economically marginalised groups in rural Bihar, India. This has led to a number of distinct operating mechanisms which differentiate it from the microfinance organisations subject to mainstream critique. This study seeks to assess whether Rojiroti’s distinct mechanisms have enabled positive changes for its women members. It aims to do this through looking at girls’ education, recognising that changes in girls’ education could be indicative of more widespread and longer-term shifts in gender equality. Theories of empowerment, with a foundation in the capability approach, are used to conceptualise pathways through which change may have occurred for Rojiroti members in relation to being able to support girls’ education. These pathways are firstly that, through membership, women may experience a change in their financial, social and cultural resources. They may then experience shifts in individual and collective agency which could influence their ability to support girls’ education. Secondary panel data were analysed and found that Rojiroti members experienced significant positive impacts on their spending on children’s education. Choosing to spend on education indicates a shift in women’s financial position, as well as a commitment to support children’s education. Subsequently, to understand in more depth the impact on girls’ education in particular, whether Rojiroti’s operating mechanisms had facilitated this change, and the pathways through which this change had occurred, twenty one-on-one interviews with Rojiroti staff and thirty focus group discussions with Rojiroti self-help group members were conducted. Findings demonstrate that Rojiroti’s low interest rates and flexible repayment mechanisms had particularly supported women to build up financial resources, which they then used to support girls’ education. Rojiroti’s focus on group cohesion and solidarity, and the fact it was predominantly women-led, led to increased social resources, and individual and collective agency that contributed to women’s increased ability to take decisions to support girls’ education and to challenge inequality in their homes and communities. Significant for those involved in microfinance, it appears that Rojiroti’s deep understanding of the context, and flexibility to adapt to the needs of its members, enabled positive change. In terms of longer-term gender transformative changes, the study cautions against interventions that focus purely on building up women’s financial resources. Social resources were essential for building skills which enabled women to advocate for, and challenge barriers inhibiting, girls’ education.
... Sharma et al. (2017) and Khatibi and Indira (2017) also evaluated the impact of SHG interventions and found that SHGs significantly and positively contribute to the empowerment of women members in rural areas. Yaron et al. (2018) studied the impact created by Rojiroti microfinance in India using panel data on 740 new SHG members and 340 women in matched control sites at baseline and after 18 months. Changes in assets, children's education, empowerment, and domestic violence among other growth indicators. ...
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