Janamma, the illiterate widow of mason Rajappan, requires Rs 2,500/- to purchase a pair of goats. She has no asset to pledge and no guarantor to support. Which bank will sanction her Rs 2,500/- as loan? `No bank` will be the answer.

Khadeeja, the old fish-vending woman, got a profit of Rs 35/- last day. She wants to save the sum for her granddaughter's marriage. She does not know how to sign and her photograph has never been taken. Which bank is interested in her account. `No bank` is the answer once again.

The poor women of Kerala always face this `no bank to bank upon` situations. The significance of the concept of informal banking exists in this void.

Formation of a strong network of informal banks for the un-reached and the under-served poor women of Kerala is one of the foremost objectives of Kudumbashree Mission. The formal banking system existing in the state, and its services are almost un-accessible to the poor folk. These banks and their procedures are too complex and too formal for the poor. The formal banking system always watches the poor with disbelief and distrust. Banks do not bother much about the trifle deposits of the poor women. Rigid regulations and procedures prevent banks from extending even nominal assistance to the assetless women, belonging to the lowest stratum of the society.

In India normal banking hours start at 10 a.m. and close at 2 p.m. If anybody wants to open an account in a bank, somebody who has got an account already, or a man of repute should introduce the person to the bank authority. Stipulations in timing, complications in procedures and disregard of banks turn the conventional banks un-approachable ivory towers for the poor. Regulations of the Central Government, directions of the Reserve Bank and the persuasions of the State Government couldn't make any radical change in the situation. The banks continue to discourage and distrust the poor.

But the poor too need money. They also want to save their trifle sums. Who will assist the poor, financially, to meet their consumption, contingent and occasions needs? No bank will or perhaps no bank can. Private moneylenders, the Shylocks, enter in to this void and exploit the situation to the optimum. Without much formality, they lend money to the poor and enslave them for lifetime in the dark dungeons of exorbitant compound interest. The money-lending leeches will suck all the money the poor ladies could earn there after. Very often the victims will lose their little precious assets like small stretches of land and tiny huts even. It is a vicious circle. Once the poor folk get trapped in the debt web, even their next generation cannot escape from it.

Any poverty alleviation programme of comprehensive nature should provide a good enough solution for this bitter reality. Kudumbashree vision is nothing but a staunch determination to assure the holistic development of the poor women of Kerala. Naturally, the project is desirous of giving a better alternative for conventional banking system to the poor. Thus thrift and credit operations get paramount importance in the CDS system lunched by Kudumbashree. Thrift and credit operations of the NHGs, ADSs and CDSs carry immense potentials to grow in to a strong network of informal banks.

informal bank, a concept exactly in line with the needs
and expectations of the poor:

Simplicity is the key word of the informal banking system envisaged in Kudumbashree project. The formation, operations and procedures of a bank intended for poor ladies have to be simple and transparent in every respect. The collective thrift savings of the members of a Self Help Group (NHG/ADS/CDS) is the corner stone of each informal bank. The ladies themselves are the depositors, creditors, managers and cashiers of the informal bank. The salient features of a model informal bank, envisaged in Kudumbashree project, can be summed up as follows:

1.      The three-tier community based CDS system, envisaged for poverty alleviation in Kudumbashree approach, will take up the informal banking responsibility also.

2.      The poor women should be able to approach the informal banks whenever necessity occurs. The doors of the banks should be open for 24 hours a day, 7 days a week and 365 days a year

3.      The informal banks are formed with the active involvement of every member belonging to the Self Help Group.

4.      An Informal Bank doesn’t need an office building, furniture and other paraphernalia we normally relate with a formal bank.

5.      The strength of an informal bank is the intimate relationship between the members of the Self Help Group. The members know each others potentials weaknesses and problems

6.      The members can deposit even trifle amount in the thrift scheme of the banks. Informal bank always tried to encourage saving habit among poor women.

7.      An informal bank can provide collateral free loans with the terms and conditions decided by the group.

8.      The Self Help Group behind the informal bank is free to fix market driven rates of interest for advances.

9.      Every operation of an informal bank takes place in the group level, including depositing of thrift amounts and sanctioning of thrift loans.

10.  The groups itself decides the eligibility of a member to get assistance from the bank after discussions and assessment of the need and repayment capacity

11.  The very existence of an Informal Bank brings about the homogeneity and affinity among members of the poor.

12.  Thrift savings of the members serve as the main bondage among members.

13.  The bank promote regularity in savings and assures sufficient frequency for group meetings

14.  The informal banks will instill collective decision-making capability among the poor women. This sublime quality will be of great assistance to them for their fight against poverty and their participation in planning process and economic development activities.

15.  Informal banks will slowly do away with the subsidy syndrome prevailing in the lowest stratum of the society. The poor women will begin to enjoy the unique pleasure of doing things with their own money.

16.  The financial empowerment of women achieved through thrift and bank accessibility will improve their status in their own families and society. Naturally, their confidence will increase

17.  Above all Informal Banks provide loans to the poor women at their own doorsteps without any hassle.

Once the informal banks of the NHGs, ADSs and CDS reach a certain level of maturity, they can grant loans to the members for genuine needs. Poor need financial assistance for several purposes, falling under four major categories.