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Extension of micro-credit under the IGDC Project through VDPIC revolving fund

The concept:

To promote Income Generating Activities (IGAs) for SHGs/Joint Liability Interest Groups/ individuals, the IGDC Project proposes to use a Corpus- to be managed as a Revolving Fund facility (RF facility) at the level of VDPIC. While the majority of the Corpus would be built from Project funding (@ `75,000/- per group), beneficiary contribution of 10% (contribution @ 10% from beneficiaries of plantation and SMC structures) may also be considered, if the VDPIC so decides. The fund would be primarily used for lending to groups, SHGs and individuals for IGAs and facilitate establishment of a Community Based Micro-Finance System (CBMFS) in the project villages.

The RF facility is proposed to be managed at the community level through the institution of VDPIC under the supervision of the VC and the Project. It would serve the micro-credit needs of the villagers and would primarily be used to provide (short) term loans to Individuals, Joint Liability Interest Groups, and SHGs for different types of IGAs / micro-enterprises.

The creation and management of RF facility would involve decision and action at four different levels – Project, VDPIC, loan applicant (SHG / Individual / Joint Liability Interest Groups) and enterprise.

Purpose of Revolving Fund Facility (RF Facility)

1. Improve access to credit for rural poor in project villages, for micro-enterprises / IGAs: The RF facility improves access to credit directly by providing part of the capital required for an enterprise / IGA. Lending from VDPIC can also encourage the formal financial institutions (banks) to provide more credit to the applicant to meet other requirements related to the enterprise which are not covered through RF facility.

2. Facilitate 'sustainable development of patta land' by providing credit support for adoption of best practices related to land and /or plantation management: Patta holders who may be interested to develop their land beyond what is supported by the project or those patta holders who are not included as beneficiary but require financial support to develop their patta land could avail the RF facility.

3. Establish a system of community-based micro-finance governed and managed by community representatives: A model of community based MFI would be established (as opposed to the external MFI), which is managed by community representatives.

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