In May 2020, while India, like the rest of the world, was suffering the human, social and economic consequences of the pandemic, Karuna-Shechen set up an innovative project to support small businesses. Two and a half years later, this micro-credit programme continues to flourish and allows hundreds of households to improve their living conditions and well-being.

I realised that the best way to respond to the economic crisis was to draw up a sustainable income generation model premised on the principles of small money, Big Change (smBC) which places the target community as development actors rather than as passive beneficiaries of the project.

Shamsul Akhtar, Director of Programmes in India

Combating the impact of the pandemic

Because of COVID-19, health restrictions force the population to slow down, if not stop their activities. As most of the people in Bihar are on daily wages, the confinement worsens their precarious financial situation. In the face of this crisis – the consequences of which are already being felt – an appropriate and effective solution must be found quickly. Shamsul Akhtar, Director of Karuna-Shechen India since 2012, is setting up the Small Business Support programme (SBS)

This hybrid micro-credit programme was launched in Bodhgaya, North Bihar, in May 2020. People wishing to receive financial support to develop a business activity receive loans ranging from 20 to 30 euros, without interest. The loans are quickly repaid and since the pilot project was set up, only one person has defaulted. The SBS is a success story.

In order to confirm (or deny) the promising results, to understand the reasons for this success, the development horizons but also the potential limits of this project, Paul Saucé and Florian Roquette went on site to carry out an impact study. Paul, a graduate in finance and humanitarian and development projects and former intern at Karuna-Shechen, had a great deal of knowledge of the projects, needs and issues in the field as well as Karuna-Shechen’s intervention strategies. Florian, on the other hand, was discovering the programmes with his external viewpoint as a data science engineer. Their respective expertise enabled the production of a high quality report.

In August 2022, Paul and Florian, accompanied by Alok Kumar and Asha Rajendran, travelled to 50 villages in Bihar. During these six weeks, they collected the testimonies of 127 people – only 102 were retained after perfecting the questionnaire – on their experience and the consequences of this collaboration on their daily lives. Although a larger-scale study would have provided a better representation of reality, the sample of people interviewed gives a clear and representative overview of the effects of the microcredit programme.

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The success of the Small Business Support programme

A bond of trust between beneficiaries and Karuna members

During their mission, Paul and Florian were accompanied by members of the Karuna-Shechen Indian team, whose help in understanding the local culture and providing translation was invaluable. However, despite the help of the translators, the language barrier affected the accuracy of the answers collected. Asha Rajendran was a member of the research team. Her female presence reassured the Indian women, encouraging them to speak more freely. Her support, like that of the compassionate motivators, was indispensable.

The presence of compassionate motivators in the villages allows the needs of the people to be brought to the fore. It is from this proximity and trust that the success of the programme is derived.

Paul Saucé

These members of Karuna-Shechen come from or live in the villages where the association works. They are therefore perfectly familiar with the local problems, needs and issues as well as the wishes of the communities. Thanks to the solid and sincere bonds of trust that they build with the beneficiaries, Karuna is able to create and implement relevant and effective programmes, as well as receive feedback from the people concerned.

An affordable and advantageous model

In Bihar, villagers do not have the savings to start or expand their businesses. Most SBS beneficiaries are already involved in other Karuna-Shechen programmes, such as health, food security or tree planting. They often find out about micro-loans by word of mouth. People who apply for a loan can receive it after a discussion with the compassionate motivators. The loan provides them with the financial boost they need to get started.

The amount lent ranges from 2,000 to 5,000 rupees (25 to 60 euros). To this amount, an average of 6,688 rupees (80 euros) is added from the beneficiaries’ own resources to finance their project. The first loan is 50% subsidised by Karuna-Shechen, while the second has to be repaid in full by the borrower. Both are interest-free. The particularity of this programme is that the amount is much lower than for traditional micro-credits. This makes the commitment less risky for the beneficiaries, who are therefore less hesitant to undertake it.

And the results are quick: after an average of one and a half months, the debtors pay back their loans. Street kitchens, sewing shops, vegetable or cosmetic sales, small grocery shops – the forms of business set up are diverse. They all contribute to the income of the entrepreneurs, but also to the local economy and the dynamisation of the village.

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Improving the quality of life of communities

The report by Paul and Florian shows that on average, household wages increase by 55% after the micro-loan and the start of a business. The benefits are not only financial. Overall, the SBS has enabled beneficiaries to improve their living conditions, whether through better education for their children, physical improvements to their homes or the ability to go to the doctor. 82 respondents also reported a change in their diet, such as the addition of vegetables or an extra meal. Of course, not all changes in household lifestyles are necessarily due to the SBS programme: other external factors have certainly played a role in improving household comfort. The programme has also increased the financial independence of some households.

Karuna was found to be very responsive to the needs of the communities in each village while transmitting the altruistic spirit that characterises it.

Paul Saucé 

The results of SBS should probably be seen in the context of the abnormal situation of COVID-19, which led to a large part of the population losing their jobs. It is possible that the effectiveness of the programme was amplified by the harsh context.

Women and microcredits

Karuna-Shechen places particular emphasis on the independence and empowerment of women. Women represent more than 80% of the beneficiaries of the microcredit programme. Some of them said they were able to buy new clothes thanks to the income generated. Beyond these findings, by establishing their own micro-businesses, they have gained a new place in society that challenges stereotypes and enhances their self-esteem.

The very first beneficiary of this project a woman from Bankai village who expressed the desire to set up a local snacks shop. Much to our pleasant surprise, she repaid the amount in just 3 days. Our financial support has enabled her to develop her business in a sustainable way and earn a regular daily income. This experience gave us the momentum to go for a bigger way.

Shamsul Akhtar, Director of Programmes in India

Despite this, particular vigilance is needed to ensure that they can reap the rewards of their work and gain or maintain their independence. It is also possible that the answers of some of them were influenced by the presence of their husbands during the interviews.

On the other hand, while 44 people reported more pleasant working conditions, another 31 (including 30 women) reported more physical work and less free time. This is due to the fact that the women combined their new activity with their household duties.

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An enriching experience in the heart of Karuna

This additional programme is a perfect example of the intervention strategies and the notion of effective altruism that Karuna-Shechen is known for. It builds on the strong ties that already exist between people and compassionate motivators. While it requires few resources from the association, it makes a significant difference in the lives of the residents. The autonomy and resilience of the beneficiaries is strengthened as they run their own businesses and participate in village activity.

From this experience, Paul and Florian will remember the profusion of noises and smells, the difference in culture, the length of the journeys, the responsibilities and excitement that go hand in hand with leading such a project, but above all the kindness of the people they met, their humility and their vision of happiness.

Conducting an impact study is both stimulating and very rewarding. Beyond the reality of the field, which is more complicated than one might think, I was marked on a human level by the kindness of the Karuna teams and the beneficiaries, whom I thank for their warm welcome.

Florian Roquette

Today, this support programme for small businesses continues to develop. Interviews with the population have revealed a desire to accompany the financial support with professional training. A potential development of this programme would open the door to micro-loans of a slightly higher value and to a wider dissemination in the areas of intervention of Karuna-Shechen.

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Initially created to respond to an emergency, the small business support programme now supports 450 men and women. It is now a viable business and economic development solution for the isolated communities that Karuna-Shechen supports.

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