It has a US$200 million loan portfolio, 4,500 staff and over 1.9 million customers in the Indian state of Karnataka, yet SKDRDP is not a bank.
The Shri Kshethra Dharmasthala Rural Development Programme, which won the well-deserved international gold award at the 2012 Ashden Awards last week, is a pioneering community savings organisation, whose loans have helped 20,000 households install renewable energy technology, benefitting over 86,000 people.
There are many good ideas in the field of sustainable development, but getting them to the kind of scale that SKDRDP has managed takes not just a good idea but a good business model and, most importantly of all, the kind of community ownership also shown by the other 2012 international Ashden Award winners.
It begins in the community: Planning, mutual support and shared responsibility
SKDRDP has promoted the formation of 169,000 self-help groups of between 5 and 20 people. 70 per cent of the members earn less than (US)$2 day and each commits to save at least $0.20 a week. Members must write individual five-year plans which include what they want to do with their savings, and any loans they wish to apply for. Setting this out in writing is “very powerful”, said the Executive Director of SKDRDP, Dr. Manjunath, speaking at the conference: “It is the first time that many of our customers have ever thought so far into the future”.
After a minimum of 12 weeks, self-help groups can begin to apply for the loans set out in their members’ five-year plans. These are initially small (up to $200 over 100 weeks), but established groups can apply for larger loans with much longer payback periods of up to 550 weeks for housing. In common with many other successful micro-finance schemes, every member of each self-help group must approve each loan and, crucially, all the members of the group are jointly liable for them. The system relies on the principal of peer pressure to keep members from defaulting on their loans. Members also have a strong incentive to approve only robust loans, and to help each other when difficulties arise.
Facilitating access to finance and reliable technology
By leveraging its member’s savings to apply for loans from commercial banks ($170 million of the total $200 million loan portfolio), SKDRDP makes significant sums of money available to its members at the low interest rate of 18 per cent (compared to the often ruinous interest rates available from local money lenders).
To make sure that the loans are not wasted, SKDRDP has drawn up a list of approved suppliers of renewable energy technology. The most popular product so far has been household-scale anaerobic digesters. This is unsurprising given that many households in the region have some cattle, and the dung from just two animals is enough to provide a household with clean-burning biogas. As Dr. Manjunath observed, the benefits are huge: “Over 85 per cent of families in the region use wood for fuel and spend over half a day each week just collecting wood”. Since it is mainly women who typically collect wood, the stoves not only save them a lot of time, but also mean that the entire family doesn’t have to breathe in sooty air.
With plans to open up energy loans to a further 70,000 self-help groups this year, the main challenge that SKDRDP is now facing is a symptom of its own success: a shortage of masons that know how to build new digesters. This won’t be a problem for long, Dr. Manjunath says that SKDRDP plans to train 200 new masons over the next three years, adding to the thousands of jobs already created by the organisation.
Joe Kuper is a Forum for the Future Scholar, currently on a six week placement with the International Institute for Environment and Development (IIED), where this blog was originally published. He is a Masters student on the course ‘Masters in leadership for sustainable development’ run by FTFF and Middlesex University.