Three out of four or 76.8% of SML's mature clients have experienced significant reduction in their poverty over the past four years. This is the most dramatic result to come out of an impact assessment of SHARE Microfin Ltd. (SML), a micro finance company operating in Andhra Pradesh, India.

CAHPOR coordinated this impact assessment, using the AIMS as adapted in its work with PHILNET, the Philippine network of Grameen Bank Adapters, and tested at ASHI in May, 2001. AIMS are practitioner-led tools for impact assessment. Fifteen senior SML staff took three weeks out from their normal schedule to adapt the tools to their clients, learn the skills of neutral interviewing, collect data from over 300 mature clients, new clients and ex-clients, and then analyze the results.

They found that nearly four out of ten (38.4%) SML clients had moved right out of poverty, despite being only between three and four years in the program. Another 22% had experienced no significant change in their poverty status.

The SML team tracked changes in poverty by using four indicators-the house index, sources of income, ownership of productive assets and the household dependency burden. Since SHARE collects information on all these indicators for each client at entry, it was possible to track changes that took place from the time of joining until the time of the survey.

The impact assessment team looked at three widely separated branches, and found the same levels of poverty movement in all of them. What came strongly out of the data was that the great majority of SML clients had been very poor at entry. That means they were mainly dependent on coolie work, owned few or no assets, had few income earners supporting many dependents and lived in small houses built of temporary materials. Now only 7% are in that position. Most of the movement has been into the moderately poor category, with the addition of at least one enterprise to the family's sources of income acquiring assets like oxen or buffalo or a sewing machine, and extending or repairing the house. But more than a third have escaped poverty by acquiring assets worth more than Rs 10,000 (US$200) - often several large animals, machinery shops, buildings or land, building large and permanent houses; and finally liberating themselves form daily labour for the local landlord by becoming self-employed.

Multiple income streams —
the way out of poverty for this family

Not all of Ediga's enterprises have been successful-she bought two goats in her first year with SHARE loan and a later investment in paddy and chilies, which was wiped out completely by heavy rains. But Ediga has always had two or three businesses going at once, so she could recoup her losses and carry on. In addition, besides her husband's arrack shop, her two sons have both started working the past few years, giving this family a resilience which has brought them well out of the poverty group.

The next year she spread her risks even more. She started buying chilies and paddy when the price was low and storing them until prices rose. She made good profits. She put some of her profits into a music machine for the shop and medical expenses for one of her sons.

In her third year, Ediga borrowed a total of Rs 13,000 (US$270) in general and seasonal loans. She continued her shop and stocking businesses. But she also used Rs 4,000 (US$82) to improve the land the family owned so that she could cultivate paddy and chilies on it. This was the year that Andhra suffered heavy rains in the usually dry month of December and both her crops were destroyed. The improved land remained however, and she is planting it again, hoping for better luck this year.

Ediga is fairly typical of the families in this study who have come out of poverty through having several income earners and investing in multiple activities. In the risky rural world of Andhra with cyclones, floods, disease and theft as constant threats to precarious incomes, hedging your bets the way Ediga has done, is a reliable strategy for escaping from poverty.

An important path out of poverty for these mature clients has been the purchase and care of milch buffalo, with the loans provide by SML. At least two milch buffaloes were necessary. Half of those clients who have two or more milch buffaloes are no longer poor, as compared to only 30% of those with one milch buffalo and 33% of those with no buffalo.

Of those mature clients with three or more earners in their household, 84% of them had experienced significant poverty reduction and more than half are no longer poor, compared to only 17% of those households with only one income earner, their poverty compared to only 47% of households with one source of income. Although raising buffalo for milk is a dominant activity in the first year of borrowing, by their third and fourth year, these SHARE clients demonstrated no less than 17 different combinations of sources of household income, with none being clearly dominant. It seems that in the context of rural India, spreading your risks amongst several enterprises and types of work is a better strategy for escaping poverty than growing one business

So the conclusion is that there are many possible paths out of poverty, provided a poor household can get access to SML's micro-finance services, and provided that these are used to add income earners to the household and to diversify its sources of income. The assessment report will be published later this year and can be obtained through either CASHPOR or SHARE

Extracted from Credit for the Poor, Vol 30, April 2001.