Can Microfinance Promote Livelihoods and Reduce Vulnerability Among Adivasis? A Study of Some NGO Interventions from Karnataka and Tamil Nadu

Introduction

Adivasis in India face the challenge of insecure and insufficient livelihoods. It is widely believed that the introduction of microfinance ¹ programmes for poor and vulnerable groups such as adivasis will enable them to develop savings habit, borrow for consumption and undertake income generating activities. This will, in turn, enable them to strengthen their livelihoods, reduce vulnerability and contribute to poverty reduction (Rajasekhar, 2002a). The literature on microfinance achievements is divided. While some studies (Puhazhendi & Badatya, 2002) argue that microfinance has a very beneficial social and economic impact, others caution against such optimism (Rogaly, 1996; Mayoux, 1998; Kropp and Suran, 2002; Banerjee, Esther, Glennerster & Kinnan, 2015). Some studies argue that microfinance does not assist the poorest (Hulme & Mosley, 1996; Rajasekhar, 2002b; Coleman, 2006). The recent studies (Garikipati, 2008; Deininger & Liu, 2009; Swain & Varghese, 2009; Swain & Wallentin, 2009) argue that microfinance will have positive impact on income and consumption. However, these studies do not pay adequate attention to the issue of whether microfinance households are still remain vulnerable and what factors contribute to their vulnerability.

In this paper, we examine the extent to which microfinance has helped to promote livelihoods, and reduced levels of poverty and vulnerability among adivasi households. We argue that while microfinance programmes improve savings and access to loans but they do not significantly improve access to income-generating assets because there is no in-built mechanism in these programmes addressing the forces that make poor households vulnerable to health and consumption shocks. Some factors that contribute towards vulnerability are outlined in this paper and also the need for introducing appropriate savings and insurance products for the poor if the microfinance was to reduce vulnerability among poor households.

The primary data have been collected from adivasi households which are members of self-help groups (SHGs), the formation of which was by NGOs from Karnataka and Tamil Nadu states. The methodology adopted is as follows. After preparing a list of NGOs working predominantly with adivasis, five NGOs were randomly selected. These NGOs are SGA—from Karnataka, and Iruala Tribes Women Welfare Society (ITWWS), Naya, Gypsy and Tent from Tamil Nadu. After reaching the project area of the selected NGO, at least three SHGs (existing for three years prior to the survey) from each project area were randomly selected with the help of a list obtained from the sample NGO. In all, 20 SHGs spread across 20 villages were selected for an in-depth analysis of study objective.

After reaching the sample SHG, microfinance needs were mapped through a ranking/mapping technique in a focus group discussion. To explore issues emerging from this discussion further, 40 per cent of the sample SHG members were randomly selected in the presence of all members for canvassing the household questionnaire. In all, 113 adivasi households, members of 20 SHGs in the project area of five NGOs located in five different districts in Karnataka and Tamil Nadu, were covered during 2006–07. Both hill tribes and those living on the plains were covered. In Karnataka, the selected NGO (SGA) covers the Koraga community, which is one of the primitive tribal groups. In Tamil Nadu, the different tribal communities covered are the Kattunayakars, Kurumbas, Irulas and Narikuruvars.

Regional consultations were held with representatives of adivasi SHGs and NGOs in each state to share key findings, validate them and receive suggestions. After incorporating the comments and suggestions coming from these workshops, the findings were revised and presented in a national seminar.

Adivasis in Karnataka and Tamil Nadu

In India, tribal communities account for around 9 per cent of the total population. The population of Scheduled Tribes was 6.9 per cent in Karnataka and 1.1 per cent in Tamil Nadu. Though these communities had a rich and creative socio-cultural spectrum, their world is by no means undifferentiated as the following information from sample villages shows.

The dominant community in eight Karnataka villages is Koraga, a primitive and the most backward tribe. Koragas are traditionally food gatherers. Landlessness was widespread in six out of eight villages. In the remaining two villages, the tribal households did own land; in fact, one household was very wealthy. The government’s intervention in the sample villages was most visible in the form of ration card provision for obtaining food grains from the public distribution system and the provision of housing facility. Yet, several households did not have their own house and did not have access to Below the Poverty Line (BPL) ration cards. In half of the villages, tribal households depended on their traditional occupation of bamboo weaving for their livelihood. In the other villages, they had to depend on agricultural labour, beedi rolling, construction work and so on. It has been noted that poverty is widespread among Koragas. They also spent most of their income on alcohol, smoking and chewing of betel; their diet is poor and malnutrition is common among children (Roy, Hegde, Bhattacharya, Upadhya, & Kholkute, 2015). However, the incidence of poverty is less among land-owning adivasi households and those diversifying their occupation.

The tribes in Tamil Nadu and their conditions vary in the project area of each NGO. Living in the coastal villages of Kachipuram District, Irulas in the project area of ITWWS are landless, deriving their livelihood from fishing, wood cutting, construction work, brick making and also from their traditional occupation of snake catching and venom harvesting. Although they received housing benefits from the government during the tsunami, several of them also lost their livelihood and suffered injuries when the tidal disaster struck them. Consequently, many have insecure occupations. Kurumbas living in the project area of Naya NGO in Nilgiris District are comparatively better off on account of the ownership of government-provided land (Zvelebil, 1988), working in tea plantations and ownership of houses. Kattunayakar is a primitive tribal group predominantly living in Coimbatore, Madurai and Dindigul districts. Many households belonging to this tribe are landless and nomadic and depend on the insecure employment provided by snake catching, construction and agricultural labour. Women from this tribe are either begging or involved in palm-reading and forecasting the future as a source of livelihood (Ganesan, 2015). The Narikuruvar tribe in the project area of Gypsy in Thiruvannamalai comprises mostly landless units dependent on bangle selling, stone cutting, chain making for sustenance. Unable to derive decent livelihood in their villages, Narikuruvars often migrate and this adversely affects their children’s education.

Microfinance Services

With a belief that microfinance has the potential to reduce poverty, the selected NGOs have formed SHGs mainly for women to provide savings and a credit facility. The selected NGOs also aimed to bring socio-economic empowerment of tribal households by initiating development activities such as improving the education and health among adivasis, improving their resource base through skill and entrepreneurship building, forest resource protection, encouraging them to understand their identity, rights and socio-economic opportunities, and helping them preserve the environment through traditional techniques.

Adivasi communities are, by and large, not used to money and commerce, and are said to have a different world view which is based on common resources, shared ownership, access and use of these resources, subsistence living and so on. After going through the process of cohabiting and interacting with mainstream societies in the recent decades, the notion of money, trading and accumulation of wealth has started to become important to adivasis. Given these circumstances, the selected NGOs found it challenging to initiate microfinance activities among the adivasis.

This could be one of the reasons why microfinance activities were recently started in the project areas of the selected NGOs. About 90 per cent of the sample households stated that their membership duration was less than four years. The duration of SHG membership was comparatively long in Karnataka, with about one-fourth of sample members having more than five years of membership. About 83 per cent of the sample households stated that the most important reason for joining SHGs was the opportunity to save money. This suggests that tribal households assigned priority to savings as compared to loans. SHGs were also viewed as instruments to access government benefits such as housing, health, education, drinking water and employment.

Savings Benefits

Savings facilities are offered to poor adivasi households through SHGs. It is believed that regular savings contribution indicates a members’ participation and improves their stakes in the programme. Through a democratic decision making process, SHG members fix an amount and periodicity of savings for the group. The data from the sample households show that 92 per cent of the SHG members from both the states contributed savings on a weekly and/or monthly basis. The amounts of savings, however, varied across the organisations and even across groups within an organisation. Some groups collected amounts as low as ₹5 per week while others collected ₹100 per month. For example, the saving amounts fixed in Karnataka were low while they were high in some of the NGO project areas in Tamil Nadu. On an average, the sample households were in a position to save around ₹54 per month.

Accumulated saving amounts contribute towards the vulnerability reduction of adivasis and enable them to avail of loans to undertake income generating activities since SHGs usually follow the principle of savings linked to credit. About one-third of the sample households from both the states had saved ₹450–600 in a year, while around 18 per cent of them saved more than ₹600 per year. The accumulated amount of savings of SHG members in Tamil Nadu was comparatively higher because of the higher ability of the sample households in the state to contribute to larger amounts of savings due to their better economic status. In Karnataka, on the other hand, around 31 per cent of the sample households had only saved amounts between ₹150 and ₹300 per year. The average cumulative saving per year worked out to be ₹434 per household. Such low amounts of accumulated savings in Karnataka can be explained in terms of widespread poverty among the Koraga tribe.

Over 42 per cent of the sample households stated that they could comfortably contribute savings while 53.98 per cent said that they had only just managed to fulfil their savings responsibility to the group. This implies that a significant proportion of the households could save more than what they were already contributing. Against this background, it becomes important to ask the question of how many sample households were willing to join in the savings product towards marriage. This question becomes important because studies have shown that households depend on borrowings from informal sources such as moneylenders at exorbitant interest rates to meet expenditure incurred during a marriage and this put them in inextricable debt traps. Our data show that around 53 per cent of the sample households in both the states were willing to save in such a hypothetical product.

This finding was discussed in the regional consultation with adivasi groups. There was a disagreement among participants on the utility of such a product for tribal households. Some of the participants noted that the adivasi way of life is simple and not indulging in conspicuous expenditure. Left to themselves, tribal marriages were very simple procedures with no notion of inviting guests, feeding large gatherings, dowry and gift-giving—all of which are part of mainstream society. But of late, because of the influence of the mainstream and greater exposure to and interaction with the outside world and media, adivasis have started to emulate these cultures by borrowing and spending exorbitant amounts on marriages. These participants said that, by introducing specialised savings products towards marriage expenses, the microfinance groups may contribute further to such trends, which was felt to be undesirable and unnecessary. However, other participants stated that since in some ways, this aspect of the mainstream had already been imbibed by many adivasis, it would be useful to provide them at least the means of saving towards it, since it was a superior option to borrowing from informal sources. The opinion among the adivasis was, thus, divided. At the end, a specialised product for another lifecycle need, say, for constructing a house, was received more favourably by them.

Credit

An important function of the SHGs is to provide credit facility to their members not only for consumption but also for productive activities. In the first year of SHGs existence, members’ savings are pooled into revolving credit fund from which their credit needs relating to consumption, such as paying school fees, purchase of medicines and buying of food grains from the Public Distribution System (PDS) are met. Since loan amounts required for short-term production purposes such as purchase of fertilisers, working capital for trade or business, purchase of inputs for dairying, are somewhat large in size, they are usually availed in the second year when the revolving credit fund becomes large enough to accommodate such needs. For helping members to take up new income generating activities, SHGs have to obtain funds from outside sources such as banks as amounts required to initiate such activities are usually large. Under bank–SHG linkage programme of NABARD, SHGs are eligible to receive a bank loan in the ratio of 1:1 to 1:5 of the group’s savings amount provided that their performance is good in regular meetings, leadership rotation, regular savings and repayment of loans. Banks have developed a format to rate SHGs on a scale of 1 to 10, and SHGs obtaining higher rating are eligible to receive bank assistance.

In all, across the two states, 133 loans (96 in Tamil Nadu and 37 in Karnataka) were availed by the sample SHG members. These loans comprised of borrowings from the revolving credit funds of the group as well as some loans from the banks through the bank–SHG linkage. Usually, the loans from the group savings were used for household consumption expenditure such as meeting expenses in connection with festivals, delivery, food, education, health and funeral. Members also borrowed for the construction or repair of houses. The facility to borrow for consumption was valued by SHG members as the following shows.

In some of the groups, all the members have taken repeat loans as the following case study demonstrates.

Some of the SHGs were successful in getting linked with banks through NABARD’s bank–SHG programme and loans from such groups were used for agriculture and other income generating activities. However, loans from banks were only 4 out of 133 loans taken by the sample members. The rest were loans from group savings.

Of the total loans, 32.33 per cent were taken towards existing or new income-generating activities (Table 1). This proportion was higher in Tamil Nadu. The proportion of loans taken for income generation in Karnataka was lower because the conditions were not conducive; about 86 per cent of the sample households were landless, their villages were isolated and conditions were unfavourable to start non-farm activities. Realising this, an NGO encouraged a few households having marginal landholdings in one of the sample villages to cultivate jasmines and provided training to do so. In this village, therefore, many loans were disbursed for non-farm activities. The average loan amount for income-generating activities was only ₹2,191 while it was around five times higher for social functions (Table 1). The different income-generating activities initiated by households using the loans from the groups were to do with small shops, small business, cloth vending, fruit vending, making chains and other jewellery, tender coconut business and so on. Most of these activities were doing well reportedly and the households were able to sustain themselves, even making some profits from time to time. This shows that the adivasis were able to initiate and sustain business activities that were quite novel to them through their membership in the microfinance groups.

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Table 1.

Purpose-wise Distribution of Microfinance Loans

Purpose	Proportion (%) to Total Loans in			Average Loan Amount (₹)
	Karnataka	Tamil Nadu	Total
Household consumption	16.22	27.08	24.06	1034
Existing or new IGAs	10.81	40.63	32.33	2191
Health expenditure	16.22	30.21	26.32	1180
Social functions	8.11	1.04	3.01	11750
House construction/ repair	40.53	0.00	11.28	1580
Repayment of old loan	8.11	1.04	3.01	1550
Total loans	100 (37)	100 (96)	100 (133)

Source: Primary data collected from sample SHGs.

Note: Figures in parentheses are number of loans.

In Karnataka, more than 40 per cent of the loans were for house construction or repair due to the poor quality of houses in which Koragas lived. A survey of all the 935 Koraga households in Dakshina Kannada revealed that 406 houses were unlivable and 298 needed urgent repairs ( The Hindu, 2012 ). Around 24 per cent of total loans were towards household consumption—the average amounts of these loans was ₹1,034, the lowest among all the different purposes for which loans taken. The highest amount, surprisingly, was towards social functions such as marriages and village festivals. The average amount of loans for these was ₹11,750. This highlights the difference in the loan amounts for productive purposes and conspicuous consumption.

Credit disbursements were, however, not free from discrimination. In some of the groups, which were heterogeneous in terms of economic or occupational status, economically better-off households managed to avail not only more number of loans but also larger amount of loans as the following case shows.

The following also shows that SHGs were biased in favour of wealthy households in the disbursal of loans.

A considerable share of the loans (26.32 per cent) was towards health expenditure. This was more in Tamil Nadu as compared to Karnataka. The average amount of loans for health was ₹1,180. Such a high proportion and credit for health was also due to their blind belief in black magic and other superstitions.

The above shows that economic thrift recedes in the background during health emergencies. And the following case shows that economic empowerment is overturned on account of health emergencies.

These cases show that the adivasi households face vulnerability on account of health crises, their belief system and lack of access to social protection.

Insurance and Social Protection

Not many sample households were aware of insurance and its importance. About 53 per cent of the sample households stated that they were aware of insurance; of them, three have taken life policies from the Life Insurance Corporation and post office. The rest of the households (46.9 per cent) were not even aware about insurance and its purpose.

With a view to extending the NGO microfinance services to include some important insurance and social protection products, we asked the sample households to rank four social protection needs—health insurance, life insurance, old age pensions and injury insurance. Table 2 shows that the two priority social protection needs for the adivasi households are old-age pensions and health insurance in that order of importance. Life and injury insurance have been given high priority by a much smaller proportion of the households.

In response to whether they would be willing to contribute some amount towards their priority social security needs, over 75 per cent of the sample households responded in the affirmative. The proportion of households willing to contribute was marginally higher in Tamil Nadu. The proportion of households willing to contribute for the different preferred social security needs is also given in Table 2. While the proportion of households willing to contribute towards health insurance, injury and life insurance was almost similar at around 75 per cent, the proportion of households willing to contribute to old age pension was highest at 83.32 per cent.

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Table 2.

Distribution of Sample Adivasi Households by Social Protection Needs to Which First Priority Accorded

Social Protection Needs	Number (proportion) of Adivasi Members	Number Willing to Contribute	Proportion to Those Giving First Preference	Average Monthly Amount Willing to Contribute (₹)
Health insurance	42 (37.17)	31	73.87	36.31
Injury insurance	13 (11.50)	10	76.94	32.31
Old age pensions	46 (40.71)	25	83.32	40.80
Life insurance	12 (10.62)	9	75.00	46.67
Total	113

Source: Primary data collected from sample SHGs.

Vulnerabilities Faced by Adivasi Households

Membership of SHGs has the potential to enable the poor to organise themselves, and approach the government collectively for accessing basic amenities, obtaining ration cards to avail subsidised food from the Public Distribution System, seek educational and health facilities and access social assistance benefits such as old age, widow and disability pensions. They also provide an opportunity to voice protests whenever the human rights and dignity of adivasis have been violated, helping them to gain economic empowerment along with social empowerment. Despite this, it is difficult to explore the linkages between microfinance membership and access to basic amenities, health and education with our data for the following reasons. First, the membership in microfinance groups has not been very long. Second, we do not have information before sample households obtained SHG membership, and also on control groups. Nevertheless, an attempt is made to examine the access to basic amenities, health, education, food, drinking water (Table 3) as this may provide some insights on microfinance and vulnerability.

Housing Security

Nearly 62 per cent of the sample adivasis own houses. The proportion of units owning houses was higher in Tamil Nadu, while the proportion of government-provided houses was higher in Karnataka. A large majority of the adivasis were worse-off with respect to the type of house, however. The overall proportion of households with pucca houses is only 5.31 per cent. Not a single household in Karnataka lived in pucca houses. Nearly half the total sample lived in semi-pucca houses, while the rest lived in kutcha houses.

About 39 per cent of the sample households did not have electricity connections and a staggering 82.30 per cent did not have any kind of sanitation facility (Table 3). With respect to electricity, a larger proportion of households in Tamil Nadu acquired individual connections on their own, while in Karnataka, the majority of the houses have been electrified through the government programme Bhagyajyothi. When it comes to sanitation, however, the difference between the states is evident. While at least 40 per cent of the households in Karnataka have access to toilets (either their own or community), in Tamil Nadu, the comparable number is only 4.23 per cent.

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Table 3.

Basic Household Entitlements of Sample Adivasi Households

Particulars	Karnataka	Tamil Nadu
Households (%) living in own houses	40.48	74.65
Households (%) that have obtained government house benefit	57.14	16.9
Households (%) living in kutcha houses	23.81	57.75
Households (%) with no electricity facilities	40.48	38.03
Households (%) with no individual sanitation facilities	59.52	95.77
Households (%) with no ration card	9.52	22.54
Households (%) reporting inadequate availability of drinking water	11.90	29.58
Households (%) regularly accessing public health providers	57.14	90.14
Households (%) regularly accessing private medical practitioners	42.86	8.45
Households (%) where at least 50 per cent of members have secondary education	14.29	5.63

Source: Primary data collected from sample SHGs.

Food and Drinking Water Security

Around 17 per cent of the adivasi households do not have ration cards, that is, no access to PDS, and therefore, have to depend on the open market. The proportion is higher in Tamil Nadu than in Karnataka. In Karnataka, a larger proportion of the households have also acquired the state’s BPL cards, that is, they have access to highly subsidised food grains. Only 4.76 per cent of households have Above Poverty Line (APL) cards. In Tamil Nadu, on the other hand, more than a quarter of households have only APL cards.

Health Security

Here, we look at the extent to which adivasi households are able to access different kinds of health providers on a routine basis. Across the two states, the majority accessed public health providers on a routine basis, while around 21 per cent regularly went to private health providers as well. By private health providers, we mean private practitioners in rural areas who go from house to house on their rounds and also set up some form of clinic in villages or nearby towns. Only a very small proportion of households regularly went to private nursing homes and hospitals. The proportion of households depending on public health providers was comparatively high in Tamil Nadu.

An interesting point emerging in this context is that in both states, no households reported going routinely to traditional healers. This point was vigorously debated at the regional consultations with the adivasis. The participants maintained that adivasis traditionally had their own systems of medicine and healing and that a majority of them still went to traditional healers for most medical purposes. They said that usually they would go to such healers and try out their medicines and remedies. Only if these failed then would they go to health centres and hospitals. It was suggested that there might have been some amount of under-reporting of facts by the surveyed households in the study. However, it was also accepted that the practice of taking recourse to traditional healing systems was on the decline as more and more people were opting for modern medicine.

Literacy and Education

Over 68 per cent of sample adivasi members of the microfinance groups are illiterate, which simply indicates that there has not been any trickling down of development benefits to these groups. The proportion was much higher in Tamil Nadu. The educational profile of all the households indicates that in both the states, the proportion of households where not a single household member has attained at least secondary education is quite high—30.95 per cent in Karnataka and 40.85 per cent in Tamil Nadu. With respect to high school education too, Tamil Nadu is relatively worse off than Karnataka—in 66.20 per cent of the households in Tamil Nadu, not a single member has high school education, while the comparable proportion in Karnataka is 47.62 per cent. The extent of college and vocational education is also quite low in both the states, where in more than 90 per cent of households, not a single household member attained such education.

Employment and Income

The main impact of such poor levels of education is on employment and employability of household members. Given this background, the expectation is that a majority of them end up as daily wage labourers. However, the proportion of households whose non-wage income constitutes more than 75 per cent of the total income is not too low—it is 35.71 per cent in Karnataka and 49.30 per cent in Tamil Nadu. On the other hand, equally, the proportion of households whose wage income constitutes more than 75 per cent of total income is also quite high—45.24 per cent in Karnataka and 39.44 per cent in Tamil Nadu.

A closer look at the income figures shows that the total income earned by households is not very high to begin with, and therefore, wage or non-wage, it does not make much of a difference. A majority of the sample households in both the states earned an annual per capita income of less than ₹10,000.

Microfinance Membership and Vulnerability

As discussed earlier, the sample adivasi households have been able to access savings and credit services from the microfinance groups. While the type and amount of savings have been unvarying and low, the credit amounts have also been low due to an absence of linkages with banks. Thus with most loans being small borrowings from their groups, they have been used primarily for household consumption, minor health needs, house repairs and income-generation activities. These have also been small-scale activities involving low levels of capital investment. There was discrimination in the disbursement of loans. Notwithstanding the access to microfinance, many adivasi households frequently faced health crises. Insurance services are currently not being offered to the group members through microfinance programmes. The extent of insurance awareness and penetration is quite low among the adivasis. Given that this is a basket of microfinance services being provided by organisations to groups, what impact has it had on different household vulnerabilities?

One of the ways to answer this question is to take a control group, without membership in such groups, in the same area and study differences. Since this is not part of the methodology, we will instead look at the same households over a timeline of membership. As we have noted earlier, the duration of membership of households in these groups was anywhere between one year to over five years. The expectation, therefore, would be that if microfinance programmes have had an impact, those households with a longer duration of membership in the groups would be in a better position as compared to those with a shorter duration of membership. We thus take some key variables, such as income and basic entitlements, and see whether and how they vary over households with longer duration of membership.

At the overall level, there does not seem to be a strong correlation between the duration of membership in microfinance groups and income. Relatively lower levels of income are seen even after a longer duration of membership in both the states, while some of those with a shorter duration of membership are also seen to be at relatively higher levels of monthly per capita income. Besides the level of income itself, another important variable, could be the source of such income, that is, wage or non-wage income. The larger the share of non-wage income, the more stable the household’s income is likely to be.

In this case, we see some kind of pattern emerging. In both states, the proportion of households with more than 50 per cent of income from non-wage sources was relatively less among those with up to two years of membership as compared to those having three or more years of membership. One of the factors responsible for this could be that the groups have been able to lend money towards income-generation activities, which help the households diversify their income sources. As noted in the earlier section, many of these income-generation activities were running successfully and even profitably, which indicates that they have been making an impact on the total income of the households.

What the above implies is that although the duration of membership in microfinance is yet to have a significant impact on the amount of income, some impact is seen in households’ ability to diversify their sources of income to non-wage activities as well. An implication emerging from this could be that the gestation period before which microfinance operations begin to make a noticeable and significant dent on income levels is longer than even four to five years.

In spite of some impact on their income, are the households able to escape the major sources of vulnerability that they face? What is the impact that microfinance has had on their access to basic entitlements? Here again, we find that no matter what the impact on income, households with a longer duration of membership are not in any significant way better off than those with shorter duration of membership when it comes to housing and food security, for instance. Some evidence of the possible impact can be seen with respect to the access of ration cards in Tamil Nadu and access to sanitation facilities in Karnataka, but besides these, the picture is quite blurred.

What is the reason for a mixed picture to emerge? One of the factors playing a crucial role could be that besides their inherent vulnerability, there are always other sources of vulnerability induced through external shocks, which households are almost never prepared to meet with their existing incomes and resource base. Therefore, coping mechanisms that they are forced to adopt push them deeper into vulnerability. It is here that all households, no matter what the duration of their membership in microfinance groups, seem to be equally vulnerable. The incidence of such random shocks or what we term as ‘emergency needs’ does not reduce as we move towards longer duration of membership. What are these emergency needs and how have the households been meeting them?

In all, 88 emergency situations had been faced by the sample adivasi households during a given reference period of three years. Further, as can be seen, the large majority of the emergencies were to do with health-related crises—41.18 per cent in Karnataka and 38.03 per cent in Tamil Nadu. Marriages, other social functions and obligations also have a relatively high incidence in both states despite the fact that expenditure on such events is not part of adivasi culture. We find that average expenditure on marriages is also been considerable: a large share of the expenditure on the crises is met through borrowings from informal sources such as moneylenders.

When faced with such large expenditure without notice, households have little choice but to borrow from different sources. Moneylenders account for more than 50 per cent of the total expenditure in both states. We get some indication that microfinance groups in Tamil Nadu have been performing better than those in Karnataka observing the following factors. One is that the share of personal savings as a proportion of total expenditure is nearly 17 per cent in Tamil Nadu as compared to around 9 per cent in Karnataka. Moreover, the total expenditure in Tamil Nadu is around four times more as in Karnataka. Given that these households seldom have sources of savings other than that of microfinance groups, it seems to indicate that the option of savings in these groups helped some households with some part of their emergency expenditure. The second indicator is the borrowings from microfinance groups themselves—while this was around 10 per cent in Tamil Nadu, in Karnataka, it was only around 6 per cent.

Around 14 per cent of the total expenditure in Karnataka is from banks—this entire amount was borrowed by one household towards wedding expenses by providing as collateral some gold jewellery. Besides this household, no other had been able to access formal sources of finance in any significant way. This implies that it is in these areas that microfinance programmes have to make a further dent in order to have a holistic impact on the households, because without such an approach, whatever small savings and income increases that it facilitates are wiped out and debts are created elsewhere when the households face one such episode of crises.

Conclusion

In this paper, we have looked at the different sources of vulnerability faced by adivasi households in Karnataka and Tamil Nadu, and also the extent to which microfinance is able to meet their different needs. We have found that the extent of insecurity that the adivasis face with respect to their promotional social security needs—housing, food, water, health, income and so on is quite high. Although they have been motivated by the NGOs to join the microfinance groups, make small savings and take credit for different purposes, the impact of these activities is yet to be firmly established. This is because the adivasi households completely lack any form of social security to meet their emergency needs—such as health situations, deaths of family members. Additionally, these communities have also followed some new trends such as incurring huge costs on marriages and other ceremonies, for which they do not have any disposable income or savings.

All these factors have led to situations where they are forced to borrow heavily from different sources, often at high rates of interest. This puts them into inextricable debt traps, usually undoing whatever positive impact that a microfinance membership is beginning to have. What this calls for is an expansion of microfinance programmes to include insurance and social protection as an important component. There is, therefore, a need to introduce savings products (which are linked to public sector banks) for meeting expenses on marriages and house construction. There is also a need to link adivasi households with social security products of the government such as the Rashtriya Swasthya Bima Yojana and Atal Pension Yojana so that they have access to health insurance and an old-age pension.