Final Project

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To most, microfinance means providing poor families with very small loans
(microcredit) to help them engage in productive activities to grow their tiny businesses.
Over a period of time, microfinance has come to include a broader range of services
(credit, savings, insurance and others) as it has been realised that the poor, who lack
access to traditional formal financial institutions require a variety of financial products.
Microfinance started with the recognition that poor people had the capability to lift
themselves out of poverty if they had access to affordable loans. High repayment rates
in the industry have changed the perception that the poor are not credit worthy. With the
right opportunities, the poor have proved themselves to be productive and capable of
borrowing, saving and repaying, even without collateral. Find out more about
microfinance in this section.
Bibi Hanifa is a successful micro entrepreneur from Hubli who has set up an incense-
stick unit along with a group of women in her neighbourhood. Earlier they worked as
daily wage labour at a nearby factory and earned a meagre income. Today, thanks to the
simple system of taking loans and repaying them, these women manage a successful
enterprise and dream of a better and more prosperous tomorrow.
Microcredit or Microfinance is the process of granting small loans to poor people,
primarily to women, who have no collateral and are marginalised. These women tend to
use their income to benefit their households and children. The process is accomplished
through a microfinance institution that:
| recruits and trains responsible, appropriate borrowers, each of whom establishes her
small business
| helps them form groups that are accountable for each other's loans
| distributes funds for loans
| meets with groups of borrowers to collect loan repayments and to guide their endeavours
Examples of enterprises established include, buying a buffalo to sell its milk; starting a
kirana store; manufacturing sweets; selling soft drinks; grinding spices; sewing; candle
making; collecting fallen hair for wigs and extensions; repairing watches; tea or petty
shops; vegetable stands; bicycle repair; carpentry and welding shop or an auto rickshaw.

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(Women running own kirana store)
(Women running own cobbler store)
(Women running a toy store)
In groups of five to ten, the women support each other emotionally and financially by
guaranteeing the repayment of each of their loans. With as little as INR 4,000 (USD
85), a borrower can start a kirana store. With INR 10,000 (USD 212), a borrower can
purchase a milking cow / buffalo, sewing machine, or set up an embroidery unit. Many
of the women become leaders in their communities and undertake projects that benefit
all the residents.
The repayment of loans plus interest generates funds that can be reinvested as a second
and third loan or used to start other women on their journey toward sustainable
prosperity. The entire community benefits from improvement projects taken on by these
newly confident and capable leaders.
Microfinance institutions broadly operate under a wide range of legal structures. They
could be registered as NGO, Trusts, Sec 25 Companies, Cooperative Societies,
Cooperative Banks, Regional Rural Banks, Local Area Banks, Public and Private Sector
banks, Business Correspondents and Non-Banking Finance Companies.

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The history of micro financing can be traced back as long to the middle of the 1800s
when the theorist Lysander Spooner was writing over the benefits from small credits to
entrepreneurs and farmers as a way getting the people out of poverty. But it was at the
end of World War II with the Marshall plan the concept had a big impact.
Today the use of the expression microfinancing has its roots in the 1970s when
organizations, such as Grameen Bank of Bangladesh with the microfinance pioneer
Mohammad Yunus, where starting and shaping the modern industry of microfinancing.
Another pioneer in this sector is Akhtar Hameed Khan. At that time a new wave of
microfinance initiatives introduced many new innovations into the sector. Many
pioneering enterprises began experimenting with loaning to the underserved people. The
main reason why microfinance is dated to the 1970s is that the programs could show
that people can be relied on to repay their loans and that it´s possible to provide
financial services to poor people through market based enterprises without subsidy.
Shorebank was the first microfinance and community development bank founded 1974
in Chicago.
The World Bank estimates that more than 16 million people are served by some 7000
microfinance institutions all over the world. CGAP (Consultive group to assist poor)
experts mean that about 500 million families benefits from these small loans making
new business possible. In a gathering at a Microcredit Summit in Washington DC the
goal was reaching 100 million of the world´s poorest people by credits from the world
leaders and major financial institutions.
The year 2005 was proclaimed as the International year of Microcredit by The
Economic and Social Council of the United Nations in a call for the financial and
building sector to ³fuel´ the strong entrepreneurial spirit of the poor people around the
world.

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The economics professor Mohammad Yunus and the founder of Grameen Bank were
awarded the Nobel Prize 2006 for his efforts to uplift the life of poor people. The
Norwegian Nobel Committee has decided to award the Nobel Peace Prize for 2006,
divided into two equal parts, to Muhammad Yunus and Grameen Bank for their efforts
to create economic and social development from below. Lasting peace cannot be
achieved unless large population groups find ways in which to break out of poverty.
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| Out of the 6.7 billion in the world, 3 billion people live on less than USD 2 per day
(ILO).
| 80% of the world¶s population has no access to financial services (GDRC).
| The world¶s 10,000 microfinance institutions provide funding to 150 million active
clients, 3/4 of who are women. An estimated 500 million potential microfinance clients
are yet to be reached (Planet Finance).
| Fewer than 2 % of poor people have access to financial services (credit or savings) from
sources other than money lenders. (Data Snapshots on Microfinance - The Virtual
Library on Microcredit).
| The Microcredit Summit estimates that INR 1015 billion (USD 21.6 billion) is needed
to provide microfinance to 100 million of the world's poorest families. The Summit
planners say it should be possible to raise USD 2 billion from borrowers' savings alone.
The final figure may be even higher. (Data Snapshots on Microfinance - The Virtual
Library on Microcredit).
| There is a potential demand for micro saving services from 19 million savers. (Data
Snapshots on Microfinance - The Virtual Library on Microcredit).
| Studies of the impact of microcredit in more than 24 countries found dramatic
improvements in household income levels. These improvements took place primarily
through growth in the borrower's business, which translated into increased household
income. The studies found that access to microcredit allowed the borrower to increase
the number of goods or services sold and reduce the costs of supplies and raw materials.
As a result, sales increased and profits grew from 25% to 40% (Units).
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The biggest strength is bringing financial services to poor people and making it
financial sustainable by the economies of scale effect.
In India the National Bank for Agriculture and Rural Development (NABARD)
finances more than 500 banks that on lend funds to self help groups (SHG).
SHGs comprise twenty or fewer members, of whom the majorities are women from the
poorest castes and tribes. Nearly 1.4 million SHGs comprising approximately 20 million
women now borrow from banks, which make the Indian SHG-Bank Linkage model the
largest microfinance program in the world.
Similar programs are evolving in Africa and Southeast Asia with the assistance of
organizations like Opportunity International, Catholic Relief Services, CARE, APMAS
and Oxfam. Also helps in the development of an economy by giving everyday people
the chance to establish a sustainable means of income. Eventual increases in disposable
income will lead to economic development and growth.
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There´s not much research done on the actual effectiveness of microfinance as a tool for
economic growth. Some argue that there´s to much focus on microfinance which will
motivating less spending in other helping assistances as public health, welfare, and
education.
Some doubt microfinance really has that impact on poverty as the practioners would
submit. Other describes micro crediting as a privatization of public safety net programs.
There´s also some microfinance institutions charging excessive interest rates.
Questions against the Grameen Bank were raised in a Wall Street Journal article. It was
regarding the repayment rate, collection methods and questionable accounting practices.

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Studies of microcredit programs have found that women often act as collection agents
for their husbands and sons, such that the men spend the money themselves while
women are saddled with the credit risk. Some borrowers have become dependent on
loans for household expenditures rather than capital investments. The key debate about
microfinance is whether it should focus on improved welfare or financial sustainability.
The two different approaches are usually named as ³poverty lending or ³the welfarist
approach and ³the institutionist approach or ³financial system approach . The
welfarist approach could be for example supplying the customer with education and
health wise the institutionists focus only on the financial service. The reason for that is
only with total focus on financial sustainability the huge demand can be met. MFIs with
the welfarist approach are for example the Grameen Bank and Women s World
Banking. Examples of institutionists are ACCION International and BRI Unit Desa.
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1. | | || : There is a huge demand and supply gap among the
borrowers and issuers In India around 350 million of the people are poor and only few
MFIs there to serving them. There is huge opportunity for the MFIs to serve the poor
people and increase their living standard. The annual demand of Micro loans is nearly
Rs 60,000 crore and only 5456 crore are disbursed to the borrower. Employment
Opportunity: Micro Finance helps the poor people by not only providing them with loan
but also helps them in their business; educate them and their children etc. So in this
Micro Finance helping in increase the employment opportunity for them and for the
society.
|| | : Indiaµs total population is more than 1000 million and out
of 350 million is living below poverty line. So there is a huge opportunity for the MFIs
to meet the demand of that unserved customers and Micro Finance should not leave any
stones unturned to grab the untapped market.
|
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people are unable to access big loans, because of the high intervention of the Govt. But
the door open for the Pvt. Players to get entry and with flexible rules Pvt. Banks are
attracting towards this segment

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: This is a serious threat for the Micro Finance industry, because as
the more players will come in the market, their competition will rise , and we know that
the MFIs has the high transaction cost and after entrant of the new players there
transaction cost will rise further, so this would be serious threat.
|&|: Basically Micro Finance is not a new concept in India, but that
was all by informal sources. But the formal source of finance through Micro Finance is
novice, and the rules are also not properly placed for it.
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""| | '": This is the biggest that threat that many MFIs are
facing. Because the excess of anything is injurious, so in the same way the excess
involvement of Govt. is a serious threat for the MFIs. Excess involvement definition is
like waive of loans, make new rules for their personal benefit etc.
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India has 800 million poor people who live on the brink of subsistence. This is one of
the largest populations of poor in the world. The bottom 5% of India¶s poor, considered
³ultra poor , face even deeper levels of chronic hunger, persistent poor health and
illiteracy. To cope with their vulnerability, the poor have no choice but to take loan for
consumption and income generation from money lenders that charge exploitative rates
of interest. This can put the poor in a debt trap. If poor people can access loans with fair
interest rates, they could break out of the cycle of poverty. Bureaucracy, corruption,
illiteracy and challenging logistics prevent the poor from accessing loans from banks
and the government. Microfinance in India started in 1974 in Gujarat as Shri Mahila
SEWA (Self Employed Women¶s Association) Sahakari`Bank. Registered as an Urban
Cooperative Bank, they provided banking services to poor women employed in the
unorganized sector. Microfinance later evolved in the early 1980s around the concept
of informal Self-Help Groups (SHGs) that provided deprived poor people with financial
services. From modest origins, the microfinance sector has grown at a steady pace. Now
in a strong endorsement of microfinance, the National Bank for Agriculture and Rural
Development (NABARD) and Small Industries Development Bank of India (SIDBI)
have committed themselves to developing microfinance. The microfinance sector has
been "witnessing a tremendous growth" during the last few years in India in terms of
loan portfolio, geographical area and outreach. With India¶s GDP growing at the rate of
7.1 % the country¶s socio-economic pyramid is turning around the story with millions
of poor people becoming entrepreneurs.
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'| |
||||||||||||||||||||||||||||||||| 4.5 billion
+" | | ||||||||144.4
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The scenario
| Estimated that 350 million people live Below Poverty Line
| This translates to approximately 75 million houses.
| Annual credit demand by the poor in the country is estimated to be about Rs. 60,000
crores.
| Cumulative disbursements under all micro finance programmes is only about Rs. 5000
crores.
| Total outstanding of all micro finance initiatives in India estimated to be Rs. 1600
crores.
| Only about 5 % of rural poor have access to micro finance.

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Some quick highlights industry growth in India:
| MFI¶s have recorded about 8.5 million clients during the year 2008-09, a growth of
60% over the previous year.
| More than 50 percent of low income households are covered by some form of
microfinance product
| The total outstanding microfinance loans posted a growth rate of 30% or 359.39 billion
over the last year¶s level of Rs 229.54 billion.
| The overall coverage of the sector is estimated to have reached 76.6 million against 59
Million last year.
| The SHG loan outstanding has increased by Rs. 71.5 billion with an addition of 6.9
million clients.
| Some parts in Karnataka faced entrenched default constituting a portfolio share of less
than 0.5%.
| MFIs so far reached 234 of the 331 poorest districts identified by the government.
| SBLP registered a decline of number of women SHGs from 82.5% in March 2007 to
80.4% in March 2008.
| The microfinance penetration index shows especially in Bihar, Madhya Pradesh,
Rajasthan and Uttar Pradesh compared to extraordinary levels reached in Andhra
Parades, Karnataka and Tamil Nadu.
| While last year¶s report focused on the increased risk in the sector, this years¶ report
takes stock of the uninterrupted growth rate of the sector despite several internal and
external adversities.
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Name SKS Microfinance Ltd

Secunderabad, Andhra
Headquarter
Pradesh
Legal Status Pvt. Ltd. Company (NBFC)
Lending Model JLG
Number of Branches 1,413
Loan Outstanding (Rs.
Mn)
18,227
(As on September 30,
2008)
Borrowers
(As on September 30, 2,590,950
2008)
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|/|0/1|
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Spandana Sphoorty
Name
Financial Ltd
Headquarter Hyderabad, Andhra Pradesh
Public Ltd. Company
Legal Status
(NBFC)
Lending Model JLG, Individual
Number of Branches 696
Mn)
11,987
2008)
Borrowers
2008)
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Name Share Microfin Limited

Hyderabad, Andhra
Headquarter
Pradesh
Public Ltd. Company
Legal Status
(NBFC)
Lending Model JLG, Individual
Mn)
8,568
2008)
Borrowers
2008)
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|/|0+/1|
Name Asmitha Microfin Ltd

Hyderabad, Andhra
Headquarter
Pradesh
Public Ltd. Company
Legal Status
(NBFC)
Lending Model JLG
Mn)
4,944
2008)
Borrowers
(As on September 30, 694,350
2008)
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Shri Kshetra Dharmasthala Rural

Name
Development Project
Headquarter Dharmasthala, Karnataka
Legal Status Trust
Lending Model SHG
Number of
22
Branches
Loan Outstanding
(Rs. Mn)
4,060
(As on September
30, 2008)
Borrowers
(As on September 612,482
30, 2008)
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1. Financial institution, Donors, Private equity is provide funds to the various

microfinance institution in India. They provide loan at the fixed rate of interest to the
Institution.
2. Various Microfinance Institution are the form a self help group and provide loan to
the group of 5 to 10 women at their stipulated rate of interest.
3. These self help group then utilised the given amount of loan for their productive
purpose and then serve the society.

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2.3 Different Working Model of Microfinance

1. Self Help Group (SHG) ± Bank Linkage Model
2. Grameen Bank Model (Joint Liability Group Model)
3. Regional Rural Bank (RRB) Model
4. Co- operative Model
5. Individual Rural Volunteers (IRV) Model
6. Micro Finance Institute (MFI) Model
2.3.1 Self Help Group (SHG)

A self-help group (SHG) is a village-based financial intermediary usually composed of
between 10-20 local women. Most self-help groups are located in India, though SHGs
can also be found in other countries, especially in South Asia and Southeast Asia.
Members make small regular savings contributions over a few months until there is
enough capital in the group to begin lending. Funds may then be lent back to the
members or to others in the village for any purpose. In India, many SHGs are 'linked' to
banks for the delivery of microcredit.
SHGs are member-based microfinance intermediaries inspired by external technical
support that lie between informal financial market actors like moneylenders, collectors,
and ROSCAs on the one hand, and formal actors like microfinance institutions and
banks on the other. Other organizations in this transitional zone in financial market
development include CVECAs and ASCAs.
A Self-Help Group (SHG) is a registered or unregistered group of micro entrepreneurs
having homogenous social and economic backgrounds; voluntarily coming together to
save regular small sums of money, mutually agreeing to contribute to a common fund
and to meet their emergency needs on the basis of mutual help. Also it is a group of
people who pool in their resources to become financially stable by taking loans from the
money collected by that group and by making everybody of that group self-employed.
The group members use collective wisdom and peer pressure to ensure proper end-use
of credit and timely repayment. This system eliminates the need for collateral and is
closely related to that of solidarity lending, widely used by microfinance institutions.[1]
To make the book-keeping simple enough to be handled by the members, flat interest
rates are used for most loan calculations.

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| Affinity group of 10-20 members
| Weekly group meetings
| Leader elected by group members
| Small and regular savings
| Group has a savings bank account operated by group representative
| Internal lending to members from own savings
| External loan to the Group as a whole
| Disbursement of loans to members at the discretion of group
2.3.1.1 Various SHG Bank Linkage Model

| Linkage Model
| Modified Linkage
| NGO Model
| Modified NGO Model
| Indirect NGO Model
| IFAD (International Fund for Agricultural Development) Model
| SGSY (Swarnajayanti Gram Swarojgar Yojana) Model

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Explanation of the figure by symbol
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2.3. 1.2 Explanation by symbol

1. Self Help Group
2. Members of SHG
3. Goverment Authorities
4. NGO (Non Government Organization)
5. Line Department
6. Commercial Bank
7. Credit
8. Savings
9. Credit and Savings
10. Technical Support
11. Job Work

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Self-help Group
"c
"c
Self Help Group Bank Linkage Model

Many self-help groups, especially in India, under NABARD's SHG-bank-linkage
program, borrow from banks once they have accumulated a base of their own capital
and have established a track record of regular repayments.
This model has attracted attention as a possible way of delivery microfinance services to
poor populations that have been difficult to reach directly through banks or other
institutions. "By aggregating their individual savings into a single deposit, self-help
groups minimize the bank's transaction costs and generate an attractive volume of
deposits. Through self-help groups the bank can serve small rural depositors while
paying them a market rate of interest.
NABARD estimates that there are 2.2 million SHGs in India, representating 33 million
members that have taken loans from banks under its linkage program to date. This does
not include SHGs that have not borrowed. "The SHG Banking Linkage Programme
since its beginning has been predominant in certain states, showing spatial preferences
especially for the southern region ± Andhra Pradesh, Tamil Nadu, Kerala and
Karnataka. These states accounted for 57 % of the SHG credits linked during the
financial year 2005-2006."

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| 5 member Joint liability Groups
| 40 member centers
| Established methodology for
1. Client screening
2. Group recognition
3. Loan sanctioning
4. Collections
| Collections enforced through
1. Joint liability
2. Peer pressure
| One time membership fees
Grameen Bank credit delivery system has the following features:
1. There is an exclusive focus on the poorest of the poor:

Exclusivity is ensured by:
Establishing clearly the eligibility criteria for selection of targeted clientele and
adopting practical measures to screen out those who do not meet them. In delivering
credit, priority has been increasingly assigned to women. The delivery system is geared
to meet the diverse socio-economic development needs of the poor.

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2. Borrowers are organized into small homogeneous groups :

Such characteristics facilitate group solidarity as well as participatory interaction.
Organizing the primary groups of five members and federating them into centres has
been the foundation of Grameen Bank's system. The emphasis from the very outset is to
organisationally strengthen the Grameen clientele, so that they can acquire the capacity
for planning and implementing micro level development decisions. The Centres are
functionally linked to the Grameen Bank, whose field workers have to attend Centre
meetings every week.
3. Special loan conditionality¶s which are particularly suitable for the poor:
These include:
i) very small loans given without any collateral.
ii) Loans repayable in weekly instalments spread over a year.
iii) Eligibility for a subsequent loan depends upon repayment of first loan.
iv) Individual, self chosen, quick income generating activities which employ the skills
that borrowers already posses.
v) Close supervision of credit by the group as well as the bank staff.
vi) Stress on credit discipline and collective borrower responsibility or peer pressure.
vii) Special safeguards through compulsory and voluntary savings to minimise the risks
that the poor confront.
viii) Transparency in all bank transactions most of which take place at centre meetings.

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4. Simultaneous undertaking of a social development agenda addressing

basic needs of the clientele :
This is reflected in the "sixteen decisions" adopted by Grameen borrowers. This helps
to:
i) raise the social and political consciousness of the newly organized groups
ii) focus increasingly on women from the poorest households, whose urge for survival
has a far greater bearing on the development of the family
iii) encourage their monitoring of social and physical infrastructure projects - housing,
sanitation, drinking water, education, family planning, etc.
5. Design and development of organization and management systems

capable of delivering programme resources to targeted clientele :
The system has evolved gradually through a structured learning process, that involves
trials, errors and continuous adjustments. A major requirement to operationalize the
system is the special training needed for development of a highly motivated staff, so
that the decision making and operational authority is gradually decentralized and
administrative functions are delegated at the zonal levels downwards.
6. Expansion of loan portfolio to meet diverse development needs of the

poor:
As the general credit programme gathers momentum and the borrowers become familiar
with credit discipline, other loan programmes are introduced to meet growing social and
economic development needs of the clientele. Besides housing, such programmes
include:
i) credit for building sanitary laterines

ii) credit for installation of tube wells that supply drinking water and irrigation for
kitchen gardens
iii) credit for seasonal cultivation to buy agricultural inputs
iv) loan for leasing equipment / machinery, ie., cell phones purchased by Grameen Bank
members
v) finance projects undertaken by the entire family of a seasoned borrower.

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The mode of operation of Grameen Bank is as follows. A bank branch is set up with a
branch manager and a number of centre managers and covers an area of about 15 to 22
villages. The manager and the workers start by visiting villages to familiarise
themselves with the local milieu in which they will be operating and identify the
prospective clientele, as well as explain the purpose, the functions, and the mode of
operation of the bank to the local population. Groups of five prospective borrowers are
formed; in the first stage, only two of them are eligible for, and receive, a loan. The
group is observed for a month to see if the members are conforming to the rules of the
bank. Only if the first two borrowers begin to repay the principal plus interest over a
period of six weeks, do the other members of the group become eligible themselves for
a loan. Because of these restrictions, there is substantial group pressure to keep
individual records clear. In this sense, the collective responsibility of the group serves as
the collateral on the loan.|
| 5 member Joint liability Groups
| 40 member centres
| Established methodology for
1. Client screening
2. Group recognition
3. Loan sanctioning
4. Collections
| Collections enforced through
1. Joint liability
2. Peer pressure
| One time membership fees

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1. Joint Liability Group will approach to the NGO for the requirement of the credit and
loan to improve their lives and for the technical support.
2. The NGO have tie up with the commercial banks and any other financial institution
they will ask them for the amount to give them so that they can provide it to the joint
liability group.
3. The Commercial bank will provide the technical support to the NGO and same they
will provide it to the Joint Liability Group.
4. Then joint liability group will provide there credits and savings to the NGO and
commercial banks
|
|
|
|
|

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|-
|- |# |||
Rural banking in India started since the establishment of banking sector in India. Rural
Banks in those days mainly focussed upon the agro sector. Regional rural banks in India
penetrated every corner of the country and extended a helping hand in the growth
process of the country.SBI has 30 Regional Rural Banks in India known as RRBs. The
rural banks of SBI are spread in 13 states extending from Kashmir to Karnataka and
Himachal Pradesh to North East. The total number of SBIs Regional Rural Banks in
India branches is 2349 (16%). Till date in rural banking in India, there are 14,475 rural
banks in the country of which 2126 (91%) are located in remote rural areas.
|,
||-
|- |# ||

Explanation of the above diagram:
1. Rural people Group will approach to the NGO for the requirement of the credit and
loan to improve their lives and for the technical support.
2. The NGO have tie up with the commercial banks and any other financial institution
they will ask them for the amount to give them so that they can provide it to the Rural
people group.

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3. The Commercial bank will provide the technical support to the NGO and same they
will provide it to the Rural people Group.
4. Then Rural people group will provide there credits and savings to the NGO and
commercial banks
|
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The cooperative model was the first to introduce microfinance in developing countries,
inspired by the successes in Europe and North America at the end of the nineteenth
century. The main principles of the cooperative approach include:
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1. The formation of the Group will take place main objective of the group formation
was to produce some products and service so that they can offer it to the market.
2. The main requirement was to have money for it and it was provided by the
Microfinance Institution to this group to start their own small business.

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3. By having the finance from the Microfinance Institution then this group will start
working together.
4. After that these group will penetrate their products into the market and earn profit
with the result of which they give it to the Microfinance Institution as a interest rate .
2.3.5 Individual Rural Volunteer Model
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1. The group will form of the 10 to 15 women and they will work under the supervision
of the rural volunteer.
2. The Rural Volunteer will ask for the financial and technical support from the
commercial bank.
3. Commercial bank will provide them technical support and that was passes to the
group.
4. The group will do work and provide the savings to the bank.

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2.3.6 Microfinance Institution Model
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1. Group will form and they will approach to the microfinance institution for the credit.
2. Microfinace Institution will approach to the commercial bank for the credit.
3. Group will work and generate cash provide savings to the Microfinance Institution
and same Microfinance Institution will provide the savings to the commercial bank.
|
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$| | '

| / is used for a variety of activities that generate
income for their families. Clients submit a loan application and based on approval
receive the loan after one week. Loans are paid in 50 equal, weekly installments. After
completion of a loan cycle, the client can submit a loan application for a future loan.
The approach with smaller short-term loan is to avoid long-term economic problems
with bigger loans.
$|
|$|/ is available to clients after 25 weeks of repaying their IGL
loan. A client is eligible for a MTL if the client has not taken the maximum amount of
the IGL. The residual amount can be taken as a MTL. The terms and conditions of the
MTL are otherwise exactly the same as IGL.
$|½ | / is available to all clients over the course of a fiscal year.

The loan is interest free and the amount and repayment terms are agreed upon by the
MFI and the client on a case by case basis. The amount is small compared to the income
generating products and is only given in times of dire need to meet expenses such as
funerals, hospital admissions, prenatal care and other crisis situations.
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needs beyond the group lending model. Loans are given to an individual outside of the

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group lending process. Amounts are typically higher than that of the income generating
loan and repayments are less frequent. Applicants must complete a strict business
appraisal process and have both collateral and a guarantor.
Microfinance is not panacea from all troubles; this also means that not any poor person
can obtain the loan. In particular, representatives of very poor population, lacking stable
income, living by means of chance earnings, and particularly having debts (in relation to
community facilities, relatives, friends, etc«) cannot be clients of microfinance, since
in case of microcredit non-repayment they will have more debts, becoming poorer. For
such people special programs of social assistance are needed, which are able to support
main needs of people living in the poorest dwellings, lacking garments and food.
There is some restrictions regarding what the money is used for. Usually micro credits
can´t be used for the purposes like:
Payments of other loans or other debts:
| Production of tobacco and liquor;

| Forming turnover capital of trade and intermediary business;
| Organization or purchasing products for gambling or entertainment services for the
population;
| Establishing trading points;
| Purchase of property that´s not used for business.
In the microfinance sector there´s other services expanding as well. The poor need, like
all of us, a secure place to save their money and access to insurance for their homes,
businesses and health. Microfinance institutions are now innovating new products to
help meet these needs, empowering the world¶s poor to improve their own lives.
Products common used in the microfinance sector today is:
2
| "
± A possibility to save money without no minimum balance. Allows
people to retain money for future use or for unexpected costs. In SHGs the members
save small amounts of money, as little as a few rupees a month in a group fund.
Members may borrow from the group fund for a variety of purposes ranging from
household emergencies to school fees. As SHGs prove capable of managing their funds

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well, they may borrow from a local bank to invest in small business or farm activities.
Banks typically lend up to four rupees for every rupee in the group fund;
X
|
± Gives the entrepreneurs the chance to focus more on their core
business which drastically reduces the risk affecting their property, health or working
possibilities. The is different types of insurance services like life insurance, property
insurance, health insurance and disability insurance. The spectrum of services in this
sphere is constantly expanded, as schemes and terms of providing insurance services are
determined by each company individually;
6
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± For entrepreneurs or small businesses who can´t afford buy at full
cost they can instead lease equipment, agricultural machinery or vehicles. Often no
limitations of minimum cost of the leased object;
7| ± A service for transferring money, mainly overseas to family or

friends. Money transfers without opening current accounts are performed by a number of
commercial banks through international money transfer systems such as Western Union,
Money Gram, and Anelik. On the surface they may seem like small money transfers, but
when one considers that such transactions take place millions of times around the world
each week, the numbers start to become impressive. According to the World Bank, the
annual global market for remittances ± money transferred home from migrant workers ± is
around 167 billion US dollars. The estimated total is closer to 230 billion dollars if one
counts unregulated transactions. Remittances are also an important source of income for
many developing countries including India, China and Mexico, all of which receive over
20 billion dollars each year in remittances from abroad.
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| 1904 Legal framework for establishing the co-operatives

| 1969 Nationalization of Bank
| 1971 Establishment of priority sectors
| 1975 Establishment of RRBs
| 1982 Establishment of NABARD
| 1992 Launching of the SHG -Bank Linkage programme
| 1993 Establishment of Rashtriya Mahila Kosh
| 1998 NABARD sets a goal for linking one million SHGs by 2008
| 2000 Establishment of SIDBI Foundation for Microcredit
| 2005 MFDEF(micro finance development and establishment fund)doubled to rs.200
crores.
| 2005 One million SHG linkage target achieved 3 years ahead of target
| 2006 committee on financial inclusion
| 2007 proposed bill on microfinance regulation introduced in parliament.

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SKS microfinance was founded in 1998 as a Non Banking Financial Corporation
(NBFC) by Vikram Akula..SKS Microfinance is India¶s largest and one of the world¶s
fastest-growing microfinance organizations. It claims that its mission is to empower the
poor by providing them collateral-free loans for income generation.
*Know SKS
|

4|
³Our purpose is to eradicate poverty. We do that by providing financial services to the
poor and by using our channel to provide goods and services that the poor need.
8

4|
³Our vision is to serve 50 million households across India and other parts of the world
and also to create a commercial microfinance model that delivers high value to our
customers.
|+4|
SKS has its own anthem titled ³Udhte Jaayen, Badhte Jaayen (meaning ³flying on,
marching ahead in Hindi) aimed at motivating staff across SKS. Composed by
Euphoria, a popular Indian band, the SKS anthem is energetic and positive in tone.
)| : Between 1998 and 2009, SKS Microfinance had a logo that was
distinctive and easy to identify. It included a visual of a group of five women, which is
core to our business. The visual was enclosed within two concentric circles in blue with
Swayam Krishi Sangam (the full form of SKS) written in Telugu.

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Vikram began working in rural India two decades ago. He started his development
career in 1990 as a community organizer of women¶s self-help groups for the Deccan
Development Society, a non-profit working in rural Andhra Pradesh, India.
He then joined the World Watch Institute in Washington DC as a researcher, where he

wrote articles on poverty and development.
As a Fulbright Scholar in India in 1994-95, Vikram led on a government-funded action-

research project that provided micro-credit to poor farmers for food security.
After extensive research based on field work and graduate study, Vikram founded SKS
Microfinance as a non-profit in late 1997. He led the organization until 2004, when he
joined McKinsey & Company in Chicago as a management consultant.
In 2005, he returned to SKS when it converted to a for-profit company and led it from
serving just thousands of poor women borrowers in one state in India to millions across
the country today.
Awards and achievements of Vikram Akula
| Vikram has received several awards for his work with SKS, including the Ernst
& Young Entrepreneur of the Year in India (Business Transformation in 2010;
Start-up in 2006),
| The World Economic Forum¶s Young Global Leader award (2008).
| Social Entrepreneur of the Year in India (2006).
| The Echoing Green Public Service Entrepreneur Fellowship (1998-2002).
| In 2006, Vikram was named by TIME Magazine as one of the world¶s 100 most
influential people.
| Vikram Akula was also featured on the front page of Wall Street Journal.

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³Our commitment to that mission remains stronger than ever and is bolstered by new
business models and innovations. We are still trying to reach as many poor people as
possible. Now we are also trying to provide them a full range of financial services, such
as insurance, while using our network to provide other goods and services that the poor
need at low cost, from solar lamps to mobile phones. This is a new, exciting phase for
SKS but all these initiatives hark back to our core objective: helping people lift
themselves out of poverty.
-Vikram Akula
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SKS Microfinance follows the Joint Liability group Model. The methodology involves
lending to individual women, utilising five member groups where groups serve as the
ultimate guarantor for each member.
Our approach is to provide financial services at the doorstep of members in villages and
urban colonies. This allows the poor convenience and savings in terms of cost and time
associated with travelling to mainstream banks and enables SKS staff to promptly and
fully collect repayments.
Our loans are designed for convenience with small weekly repayments corresponding to
cash flows. Small first loans inculcate credit discipline and collective responsibility.
Interest and loan repayments are simplified for easy comprehension.
The step by step procedure of SKS Microfinance
8
|
: Before starting operations, our staff conduct village surveys to
evaluate local conditions like population, poverty level, road accessibility, political
stability and means of livelihood.
!3
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: After a village is selected, SKS staff introduces the
community to its mission, methodology and services.

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: Follow-up with interested women, and direct appeal to
those who may not have attended earlier because of religious, class, caste or gender
barriers.
)'|
: Women form self-selected five-member groups to serve as
guarantors for each other. Experience has shown that a five-member group is small
enough to effectively enforce group peer pressure and, if necessary, large enough to
cover repayments in case a member needs assistance
2%||
:
CGT is a four-day process consisting of hour-long sessions designed to educate clients

on SKS processes and procedures and to also build a culture of credit discipline. Using
innovative visual and participatory teaching methods, SKS staff introduces clients to

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our financial products and delivery methods. CGT also teaches clients the importance of
Collective responsibility, how to elect group leaders, how to affix signatures, and a
pledge that serves as a verbal contract between SKS and its members. During this
training period, SKS staff collects quantitative data on each client to ensure
qualification requirements are met, as well as to record base-line information for future
analysis. On the fourth day, clients take a ³Group Recognition Test conducted by a
different staff member than the one who trained them. If they pass, they are officially
accepted as SKS members.
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: As additional groups are formed within a single village, a Centre
(sangam) emerges. During Centre Formation, groups are combined to form a centre of 3
to 10 groups or 15 to 50 members. Weekly Centre meetings serve as a time to conduct
financial transactions. Meetings are held early in the morning, so as to not interfere with
clients¶ daily activities.A leader and deputy leader are selected to facilitate meetings and
ensure compliance with SKS procedures. In addition to financial transactions, members
use the weekly meetings to discuss new loan applications and community issues. Centre
meetings are conducted with rigid discipline in order to sustain the environment of
credit discipline created during CGT.
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1.Loans range from Rs. ):(((||-| (:((( for the first loan; subsequent loan amounts
determined by past credit history and increased each in set increments unto a maximum
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2.Term of the loan

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basis
3. 2;| |
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Provides self-employed women financial assistance to support their business

enterprises, such as raising livestock, running local retail shops called kirana stores,
providing tailoring and other assorted trades and services.
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1.Loan amounts range from Rs. :(((||-| ):((( in each annual cycle.
2.Available any time after the completion |(||=||)(| of an IGL
cycle.
3.Term of the loan is 2(| with principal and interest payments due on a weekly
basis.
4. 2;| |
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Provides self-employed women financial assistance to support their business

enterprises, such as raising livestock, running local retail shops called kirana stores,
providing tailoring and other assorted trades and services.
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1| emergency loans range from Rs. 2((||-|:(((
2.Term of the loan is (| with a bullet repayment.
3.Interest free funeral advances of Rs| :(((| 3 out of the claim settlement of
loan cover insurance.

1.Designed to meet the unforeseen emergency requirements of members.
2.Disbursed

|)| of request.
3.Funeral advance paid to a member¶s family upon the death of the member or her
spouse.
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2.$||2| with principal repaid weekly.

1.Issued to members to pay their life insurance premiums during the initial 25 week
period.
2.Helps to promote habit of savings and reduction of vulnerability among members.

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3.| X );| |

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Provides financing for mobile phones and telephone services to our members.
| ||/ |
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1. Working capital loans ranging from Rs. :(((||-| :2((|
2. Interest free.
3. Term of the loan is )| |
Provides a working capital loan to fund the needs of our members who own
and operate kirana stores. The program allows these members to purchase their
inventory of consumer goods and groceries from a national wholesaler at wholesale
prices.
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1.Loans range from Rs|2(:(((||-| 2(:(((|
2.Members must have completed at least |'/|cycles to qualify or one ILP to be
completed.
3. Term of loan
|||2 years with principal and interest payments due on a monthly
basis.

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4. *;| |
| :| ; annual effective interest rate.
5. In addition, loan processing fee of ;| ||

Provides financial access to women for construction of new houses or
improvement & extension of existing houses.
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1. Weekly payment of -|(| the term of five years.

Upon death, we disburse to the beneficiary the full sum assured of Rs. 5,000
plus the account value, which is equal to the aggregate of the premiums paid plus
interest accrued, if any, less any charges for the administration of the policy.In the event
the death is deemed an accidental death, the beneficiary receives Rs. 10,000 plus the
account value. Upon maturity in five years where no death has occurred, we disburse to
the policyholder the account value.
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Name: Bandaru Lakshmi
Children: Two Daughters, One Son
Place: Atukula Bazaar, Suryapet, Nalgonda District
Business: Sells Readymade Garments
Lakshmi starts her day very early. She completes all the household chores and sets out
to make a living. She sells readymade garments in the nearby villages and earns INR
500 (USD 10) everyday. This is today¶s Lakshmi.
When Lakshmi with her family came to Atukula Bazaar, in Suryapet, they were
penniless. The family had no hope of surviving. Her husband was not doing too well at
his business and no one was ready to lend them money. Lakshmi was worried about
how they would bring up their two daughters and son.
Lakshmi came to know about SKS operations in her village and she took an income
generating loan of INR 10,000 (USD 212). With that amount she started to buy and sell
readymade garments in the nearby villages. With a heavy load on her head, she went
door to door and worked hard to pool up money. Confident about the sales and her hard
work, she took a second income generating loan of INR 12,000 (USD 255). Later, she
took a loan of INR 14,000 (USD 297) to purchase the readymade cloth for more sales.
Her daily earnings were growing steadily. Today, she clocks a monthly income of INR
30,000 (USD 638) per month.
Lakshmi is an inspiration to many today. A role model of sorts to other members at

Suryapet, Lakshmi recently felt most rewarded when her eldest daughter secured a job
in Infosys. ³Thanks to the loans SKS extended to me time and again, I was able to give
my children a decent education. Today people respect our family and I am grateful,
says Lakshmi, her eyes brimming with tears of gratitude and joy.

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|
Name: Ameena Bi
Children: Two Daughters, One Son
Place: Chowdadena Halli, Narsapur Mandal, Kolar, Karnataka
Business: Florist
When Ameena Bi and her husband Abdul Latif from Kolar worked as daily wagers they
could barely make INR.120 (USD 2) per day as wages. While Ameena was a
construction labour, Abdul worked at a shop making mattresses. With three school-
going children to fend for, they had a tough time making ends meet.
Three years ago, they sensed hope round the corner when Ameena learnt about SKS.
She joined an SKS centre near home and availed her first Income Generation Loan of
INR 10,000 (USD 212). The couple dreamt of having a small shop selling mattresses,
pillows and cushions. Cotton and cloth are sourced from wholesale dealers in Bangalore
and an assistant was hired to help with the work.
³It takes approximately three hours to make a single mattress and we charge INR 600
(USD 12) for the same. The Assistant is paid Rs.40 per mattress, explains Abdul.
Twenty-five weeks later Ameena took a Mid-Term loan of INR 2, 000 (USD 42) and
with her father¶s help set up a small enterprise selling flowers. She sources flowers
from her own little garden and the wholesale flower bazaar in Kolar. She has also hired
two assistants who help her make garlands and she pays them Rs.40 per day (less than a
dollar). Soon she created a sales channel using local trucks who would help transport
her flowers to nearby local markets.
Ameena and Abdul were gaining confidence in themselves with every passing day. At
the end of 50 weeks, Ameena took her second Income Generation loan of INR 12,000
(USD 255) which the couple used judiciously to expand their business.
Today, Ameena earns INR 300 (USD 6) per day and during festive and wedding
seasons this amount goes up significantly. Abdul too earns INR 300 (USD 6) - INR 400
(USD 8.5) on an average per day. They have come a long way in the three years of
using

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microfinance and look forward to when they can access an Individual loan which would
help them further build their business. I am happy with the services rendered by the
Company. Our lifestyle has improved and we are respected and loved by all. Today we
dream of a larger business and a better life for our children, says a grateful Ameena.
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Lakshmi bought her Nokia phone through SKS Microfinance. Through a pilot program,
SKS customers are offered loans repayable on a weekly basis, making phone ownership
much more affordable. It also helps people get a Nokia handset and a prepaid
subscription without leaving their village, as it is delivered to their doorstep. Previously,
purchasing a handset would involve travelling to the nearest town and paying the entire
handset cost upfront in cash. For many, this amount would have been 30 to 50 percent
of their monthly income, putting the purchase out of reach
2|
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||.|

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| While credit for Micro-enterprise has been the anchor of microfinance, SKS knows that it
is not just enough. Therefore, SKS provides quality English medium primary education
to children of rural India at very low costs through the Bodhi Academy; it ensures better
health for children across rural India through mass scale immunisation and deworming
programmes.
| For the destitute sections of society who do not have even the social collateral to access
microfinance, SKS manages the Ultra Poor Programme through its NGO.
| The SKS Ultra Poor Programme addresses the challenge of extreme poverty in its three
manifestations, economic, social and health, and aims to graduate ultra poor clients to a
point where their growth is self-sustainable.
| An intensive 18-month programme helps enhance the awareness levels about government
resources, social issues and health care, and creates stable livelihoods.
| Upon graduation, many members may choose to join microfinance organisations or
government sponsored SHG (Self Help Group) Bank linkage programme to sustain
livelihoods and diversify into new opportunities.

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|/

|
Spandana team gathered some money, a few likeminded friends and family members
who also bought their idea and loads and loads of courage. Spandana team started
operating under their own NGO in 1998 and called it Spandana. Spandana stands for
Responsiveness: and in this context, responsiveness to the needs of low-income clients
Initial growth: In the first two years (1998-2000), around the turn of the century,
Spandana crossed its first milestone of Rs.1 crore (10 million) disbursement and about
2,000 clients. Funds were difficult to raise. Bankers were wary of this client segment
since the state directed credit given by Bankers had dismal repayment rates. It took
months of demonstrated repayment performance and conviction of Spandana team,
initial support of FWWB and support of friends to lead to trickling-in of loan funds.
Know Spandana Sphoorty Financial Limited
& : Spandana stands for µ

"¶. Spandana started as a response to a
need and an opportunity and continues to operate with the same philosophy.
After transformation into an NBFC, Spandana added the following phrases to its name ±
Sphoorty Financial Services. Sphoorty stands for µ

¶ ± this exemplifies the
growth of Spandana in provision of larger bouquet of financial services to larger client
base.
/: Spandana¶s logo depicts a sunflower¶s open petals. This highlights the
responsiveness of Spandana towards its client needs. The disjoint petals highlight that
Spandana is an open and innovative organization which promotes its employees to
challenge the conventional methods and conventional wisdom and bring about
innovation in their actions such that the theme of Operational Efficiency is sustained.
% | : The sunrise yellow ± as corporate colour of Spandana comes
from the Sunflower and denotes a sense of celebration associated with the opening of
sunflower and starting of economic activities in our client households.
|

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: We want to be one of the most significant microfinance service provider
by offering a range of financial and non financial products and services to low income
households and individuals to improve the quality of life. We constantly endeavour to
deliver quality services to our clients and remunerative returns to our Investors by
maintaining highest levels of transparency and integrity. We strive to be the most
preferred Employer in the Industry.
2%| " : TRICS is the basic core value of the Spandana Spoorty Financial
Limited
$ransparency - Maintaining simplicity and clarity in all activities and operations, so that
high standards offairness can be established in all the dealings.
-esponsiveness - Constantly working to identify the changing needs of clients and

potential clients, and developing suitable products and services to address these needs
thus keeping Spandana ahead of its competitors.
ntegrity - Maintaining high standards of conduct, truthfulness and honesty in all

dealings, in order to honour the commitment made to our clients and organisation.
%ommitment - Performing all activities and tasks with professionalism and enthusiasm
in order to give the highest level of client satisfaction and optimal efficiency.
Team pirit- Working together as to create synergy that results in exponential growth.

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Mrs. Padmaja Reddy was born to a family of farmers in a small town Guntur in Andhra
Pradesh. Her upbringing and education has made her a strong individual who
challenged conventional thinking Her determination, insights into the livelihoods of the
poor and an insatiable appetite for sustainable market linked solutions have gone a long
way in establishing her as a first generation entrepreneur.
Padmaja, after her post graduation in management, worked in an NGO and later in
1998, started her own entity µSpandana¶. Microfinance became her calling as she went
searching for a scalable, viable, sustainable model of social development ± especially
focused at low-income women folk .|Padmaja continues to put her priorities in the order
of ± clients first, employees second, organization third and self at the last. With every
new challenge, she gets excited and perceives that as an opportunity to prove herself.
No dream is too big for Padmaja. She built an organization which has over 12,000
employees out of grit and conviction. She pursued various trainings on Microfinance ±
all CGAP modules on Microfinance, a course on Microfinance at Naropa University,
U.S.A, Credit and Micro Enterprise Development Training from Durham University
Business School, U.K Market Research for Micro Finance at Uganda etc. She continues
to steer Spandana in setting new benchmarks for the financial services industry.

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1
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1. Small venture.
2.50 weeks.
3. Weekly payment.
4. Loan size 2000 to 20000 rs.
5. Group based lending.
This is the most dominant loan product helping in driving financial inclusion
of low-income clients, predominantly women. Weekly repayments ensure that the
clients can save a little from their daily cash-flows and do not face repayment stress.
.Loans are used for cash flow smoothening and productive purposes.
| |
| |0
1
x

2.50 weeks.
3. Weekly payment.
4. Loan size 2000 to 10000.
5. Second and subsequent loan.

c

For all group clients who have gainfully employed, Abhilasha loan provides
higher amount of funds to meet working capital needs, emergency needs unbudgeted
requirements particularly in case of seasonal businesses. This loan offers an avenue to
our microfinance clients to get flexibility of an interim loan. This loan is also useful for
temporary cash requirements like education, health emergencies etc. This loan is also
useful for temporary cash requirements like education, health emergencies etc.
|
|½
|/ |0!
1
x
1. Any micro enterprise.
3. Loan size 15000 to 25000.
4.12 to 18 months.
5. Monthly repayment.
This product is offered to those microfinance clients who have slightly higher
economic well-being and have stable monthly cash-flows. This helps the clients to
avoid spending time on weekly meetings while at the same time enjoy the benefits of
sustained credit supply by virtue of peer pressure based repayment discipline.
|
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|/ |01
x
1. Individual loan.
2. Small and medium sized enterprise.
3.12 to 14 months.
4. Monthly repayment.

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5. Loan size 20000 to 300000 rs.
This loan is offered to low/lower-middle-income people running micro-

enterprises or having any other stable income source. This loan is delivered to
individuals. This loan is given primarily to borrowers who graduate to higher ticket
sizes from group loans. This loan product helps us go up the value chain and also to
provide support to our existing clients who have moved up the economic ladder.
|+
5
|/ |0,
1
x
1. Agriculture /dairy.
3. Loan size 5000 to 25000.
4.11 months.
5. Bullet repayment.
This loan is offered to small and marginal farmers and tenant farmers. The
loan offers flexibility to pay interest monthly and principal in one / two bullets
depending upon their harvest and realisation. This product has been piloted in Andhra
Pradesh and now ready for scale-up across three states where we have gained
substantive experience of local economy over a couple of years.
| |½
|/ |0. 1
x
1. Individual loan.
2. Agriculture and commercial.
3.3 years.
4. Tailored repayment.
5. Loan size 50000 to 300000 rs.

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& Kursheed
Begum
8
Shamirpet
8 Tailor
and
proprieter

| Rs.
/ 10,000
%| Rs.
/ 20,000
Like so many of Spandana¶s clients, Kursheed Begum started small. She was nineteen
when she moved to Shamirpet, a semi-urban community outside of Hyderabad, and for
eighteen years she raised four children while doing tailoring work for some of her
neighbours. Her Husband was a construction worker. In 2004, Kursheed decided that
with a small amount of credit, she could help her husband increase their household
income and raise their family¶s standard of living. With a Spandana loan of Rs. 10,000,
she began her first business, a small kirana shop nearby that sold bottled drinks and
food items. The shop was the first of its kind in this developing community, and its
operation was a huge success for Kursheed¶s family. In 2005 she fully paid off her
outstanding loan and moved to take a second loan, this time to establish a small copy
store next door to her kirana shop. In 2006, after taking her second Spandana loan of Rs.
15,000, Kurhseed bought a Photocopy machine and a small coin-operated telephone to
open up the photocopy store. This business, along with her kirana shop, has added Rs.
80,000 to her family¶s annual income. She has been able to send all her children to
school, and they have bought a house of their own near her businesses. Recently,
Kursheed took another loan from Spandana ± of Rs. 20,000 ± to start a tailoring
business in her neighborhood. Her businesses now employ three people in her
community, and her tailoring shop serves clients in the surrounding communities.
³Before I started these businesses, as a Muslim woman I would not even come out of
the house, Kursheed told Spandana. ³Now I am confident.
|

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|
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|
& Laxmi
8
Kukatpally
8 Ironing
Shop

| Rs. 12,000
/
%| Rs. 12,000
/
Because of taking a Spandana loan, says Laxmi, a resident of the Kukatpally locality of
Hyderabad, ³I can help other three families sustain themselves. Laxmi is referring to
the three employees she has recently hired to help her run her ironing business. Laxmi is
a relatively new Spandana client, but access to credit on terms she can afford is already
helping her to improve her life and the lives of others.Laxmi was first exposed to
Spandana through a friend who had taken a loan. At the time, Laxmi was operating a
small ironing stand near her home. Hers was one of the few ironing shops in her locality,
so neighbors seeking to have saris and pants pressed supplied a steady stream of
business. As new business owners, however, Laxmi, her husband, and her thre e
daughters could only afford to buy two irons, which severely limited their productivity
and forced them to work long hours to complete all the orders they were receiving.
When she heard about Spandana¶s group loans, Laxmi decided that joining a centre
would be a good idea for someone in her situation. Her family had no savings and they
could not procure a usefully large lump sum from the business¶s profits ± most of the
profits went to pay the medical bills for Laxmi¶s youngest daughter, who has heart
issues. But a reasonably priced loan would allow them to buy more irons and to take
more orders, increasing their daily income without raising their costs. In late 2008,
Laxmi and some friends formed a centre and took loans from Spandana. Laxmi¶s
inaugural loan of Rs. 12,000 allowed her to purchase two more irons, which doubled her
business¶s output. Now that she is able to handle more orders, she has expanded her
business, hiring three local factory workers who work for her at night.Laxmi still works
very hard, but she feels that she is now dedicated to a business that has the tools it needs
to be profitable
|

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|/

|
SHARE, one of the largest microfinance institutions in India, started its operations for
the poor in 1989 as a not-for-profit society. It was the first microfinance institution
(MFI) in India to obtain a Non Banking Financial Company (Non Deposit) licence.
SHARE has adopted a for-profit approach to create social returns by channelling funds
from development institutions and commercial banks as collateral-free loans to Joint
Liability Groups (JLGs). JLGs are central to the Grameen lending methodology that
SHARE has replicated.
.|+-½|

|
||8

|
To improve the quality of life of the poor by providing access to financial and support
services and to be a viable financial institution developing sustainable communities.
||

|
To mobilise resources in order to provide financial and support services to the poor,
particularly women, for viable productive income-generating enterprises enabling them
to reduce their poverty.
|3
"|
To provide financial services predominantly for poor women.
To create self employment opportunities for the underprivileged.
To train the rural poor in simple skills and enable them to utilise all available
resources and contribute to employment and income generation.

c

|||
|||||+-½|

|
Mr. M. Udaia Kumar,
Mr. M. Udaia Kumar is the Founder and Managing Director of SHARE Microfin
Limited. He holds a Masters in Business Administration (MBA) and has been trained in
development studies at Selly Oak College, University of Birmingham in the United
Kingdom and in microfinance from the Economics Institute Boulder, University of
Colorado
||||||||||+
"||+-½|

|
| µUdyog Rattan Award¶ and µExcellence Award¶ for the year 2008 given by the
Institute of Economic Studies, New Delhi.
| The µLifting Up the World with a Oneness-Heart Award¶ for the year 2002 presented
by the Chinmoy Mission on behalf of the Peace Meditation at the United Nations in
New York City.
| The µExcellence in Micro Credit Award¶ for the year 2000 presented by the Grameen
Foundation and Rockefeller Foundation, New York, USA.
| The µRashtriya Ekta Award¶ for the year 1999 presented by the Chief Minister of
Delhi Mrs. Sheela Dixit.
| The µBharat Jyothi Award¶ for the year 1999 awarded by the International Integrity
Peace & Friendship Society, presented by the former Union Minister Mr. Bandaru
Dattatreya.
| The µChange Makers Award¶ for the year 1997 awarded by Dr. Reddy¶s Foundation
for bringing about a significant change in the field of rural banking

c

|
|
||
Client Focus and Client Understanding are the key words that define SHARE¶s
approach towards microfinance. SHARE¶s continued efforts to improve organisational
efficiency have yielded rich dividends raising its efficiency level and promoting
transparent systems and processes, ultimately helping SHARE emerge as a premier
microfinance institution in the country.
+-½||
JLGs are central to the lending methodology that SHARE has replicated. In this
methodology the group lending technique is used to extend loans to women members
who have formed themselves into groups of five each, with the general criteria that they
have to be of the same age group, of the same area, and known to one another. Family
members or relatives cannot be part of the same group. Members of each group receive
seven days of training on various aspects of the operating model, during which they
learn their own signature to have an identity for themselves. Eight groups come together
at a µcentre¶ for weekly meetings.
The members assume the responsibility of approving loans and disbursement, and
ensuring repayment. The loans have to be repaid in 50 weekly instalments. There is no
collateral to back these loans and repayment is ensured using social/peer pressure, as the
group isresponsible for collecting the loans. To ensure that the loan is utilised only for
the intended purpose, the money is given in a staggered manner to the group members
and subject to satisfactory assessment by the field credit officers.
$ |

|||||||||||||||||||||| ||||||||||||||||||||| ||||||||||||||||||||||
|||||||||||||||||||||| |||||||||||||||||||||||||||||||||||| |||||||||
The loans have to be repaid in 50 weekly instalments. There is no collateral to back
these loans and repayment is ensured using social/peer pressure, as the group is
responsible for collecting the loans. SHARE¶s members learn about the company¶s loan
delivery method through a public orientation meeting that briefs them on loan
disbursements and related procedures.

c

After forming groups of their choice and agreeing on the income generating activity
they would like to pursue, SHARE assists its members by equipping them with basic
business development skills such as pricing, marketing and quality management. Field
staff members facilitate weekly group meetings, in which members undertake the
responsibility of approving loans and repayments. Members go through additional
social development programmes that cover topics ranging from children¶s education to
health, nutrition and sanitation.
|
|
|

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Since inception, SHARE has nurtured a vision to provide financial services to people in
the low-income segment. SHARE supports productive projects, which allow its clients
to increase their incomes and generate well-being for their families and communities.
SHARE believes in innovation as a tool to offer customised products and services to
address the needs of its clients. SHARE offers two kinds of loan products - group loans
and individual loans. Group loans are used by women, SHARE¶s main clients, for
income generating activities. Other kinds of group loans offered by SHARE are special
loans and education loans. For individual loans, SHARE targets small and medium
enterprises, regardless of the client¶s gender. SHARE has created this secured product to
build deeper relationships with group-lending clients who want to grow their
businesses, and at the same time expand the client base by reaching out to new clients.
In addition, SHARE lends unsecured personal loans to salaried employees in semi-
urban and urban areas.

c

|
8
| | || |

|/|
LOAN TYPE OF PURPOSE LONG LOAN RATE OF

PRODUCT LOAN TERM SIZE INTEREST
DURATION
GENERAL GROUP INCOME 50 WEEKS 6000 23.60% TO
LOAN GENERATION TO 28.13%
25000 12.50% TO
RS 15.00%(FLAT)
SPECIFIC GROUP INCOME 50 WEEKS 2000 23.60% TO
LOAN GENERATION TO 28.13%
20000 12.50%TO
RS 15.00%(FLAT)
EDUCATION GROUP SCHOOL/COLLEGE 50 WEEKS 3000 23.60% TO
LOAN FEES TO 28.13%
5000 12.50% TO
RS 15.00%
MICRO GROUP INDIVIUAL 3 -24 20000 24.91%
ENTERPRICE /DEVELOPING MONTHS TO
LOAN BUSINESS 300000 14.00%(FLAT)
RS
PERSONAL INDIVIDUAL PERSONAL NEED 6 ± 24 9000 24.91%
LOAN MONTHS TO 14.00%(FLAT)
99000

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|
| In order to enhance the quality of life of its clients, employees, and their families,
SHARE participates in a range of social initiatives, fostering the development of the
communities in which SHARE operates.
| SHARE organises various programmes and workshops for its clients. Such programmes
build awareness on various aspects of social development such as children¶s education,
health, nutrition, non-formal education, adult literacy and sanitation.
| SHARE conducts training programmes for its staff on teaching and motivational skills
so that they can provide services to the clients in a more effective manner.
| Grievance Redressal Mechanism
| The Company has laid down a grievance redressal mechanism within the organisation
to resolve any disputes arising in this regard. The Board of Directors periodically
reviews the compliances of the Fair Practices Code and functioning of the grievances
redressal mechanism at various levels of management.

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|
)|+
|

|/|0+/1|
Established in year 2002 Ashmitha microfin limited is a microfinance that provides
rural poor women access to financial resources in the form of collateral free small loan
for income generation and livelihood promotionsThis enables them to set off small start
up business which soon translates into adequate nutrition, medical aid and
educationWith increased business these low income women economic agents intrinsic
to development rather than simply homemaker.
Asmitha Microfin Limited was registered as a public limited company with the
Registrar of Companies. It was also registered with the Reserve Bank of India under
section 45/1A as an NBFC (Non Deposit Accepting).
The vision, strategic planning for viability and proper pricing has paved the way to
realize the inevitable magic of success. The dynamic partnerships with our investors
defined common visions, which helped in managing the agreements with an
understanding of the broader programmatic, institutional and financial issues. As a
result, both parties enhanced their understanding of effective development, mutual
accountability and institutional performance. The company established a landmark by
surpassing the targeted numbers of outreach strengthening the portfolio with good
quality. The operations have shown a remarkable performance depicting the potentiality
in the current market perspective being self-sufficient. Systems and procedures have
been strengthened to further cut down the operationalcosts.The institution has
developed a sectoral image signaling seriousness about loan collection that reflect
nearly 100% repayment rate till date and an excellent portfolio quality.

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|||+
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Asmitha follows the credit methodology of Self Help Group Lending wherein the loans
are disbursed to the members of a group after the joint undertaking of liability by all the
members within the group. The members in a group are selected so as to be in the same
age group and residing in the same locality being friends but not from family. In case of
problems in recovery from even one of the members, the system of joint liability
ensures recovery of the dues from all the members within a group. The methodology of
loan delivery is initiated by the field staff of Ashmitha by meeting organizes in the
village. The prospective women client are briefed about the loan delivery programme
and are motivated to form the group of five women member based on specific criteria
constraint. The group form a centre consisting of 40 to 45 members and maximum 8
groups. The group members undertake the responsibility of approving the loans,
checking the loan utilization and repayment after their enrolment as members. Loans are
disbursed in a taggered ratio of 3:2 in order to build up group peer pressure. The loan
utilization is closely monitored by the project staff of Asmitha.
Apart from the loan disbursement and recovery schedule, the members are invited to
attend workshops and training programs, which is a platform for all the members to
come together and share their experiences. The exposure visits enable members to learn
about the various activities undertaken by their counterparts in other villages/centers
thereby increasing the number of income generation options and levels of confidence
among the members.
|

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With loans from Asmitha, Uppuluru Rani, her husband and their two children are
experiencing a newfound hope. Her relationship with Asmitha began when she
organized four women to become the first group in their village to participate in the loan
program.Uppuluru Rani, one of the most successful clients, used her first loan to
purchase a buffalo for selling milk. Based on the good credit history she developed,
subsequent loans have helped her to diversify her business range. Uppuluru Rani
describes the Asmitha loan support as ³convenient, flexible and fast . Sales from her
business have increased many folds and have helped her think bigger.

c

3.4.3.1. Case Study of Ashmitha Microfinance Limited
& Laxmi
8
Kukatpally
8 Ironing Shop

|/ Rs. 12,000
%| Rs. 12,000
/
Plagued by debt and lack of access to credit, Josephine searched for avenues that could
provide loans. A woman friend recommended Asmitha. When Asmitha extended a
business loan to Polanki Josephine, her small business was able was finally able to meet
plans for growth. The loan helped the family in procuring raw materials that helped in
getting rid of the mounting debts and also enabled them to expand their existing
business. The expanded revenues also enabled them to add two additional employees.
With the support of her husband, she was able to expand her business and build a small
house with the profits from her micro business.
"I thank God for always being with me, and Asmitha for giving me its support when I
needed it most."

c

|
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|. |, |- |,"|!3 |
0.,-,!1|
In the early 90s, on a review of the project, it was realised that mere charity does not
give the desired result. Hence SKDRDP adopted the self-help mode by organizing Self-
help Groups (SHGs), more on the lines of Joint Liability Groups (JLBs) of Bangladesh.
Today, the SKDRDP encompasses all aspects of enriching the rural life. As on date the
SKDRDP is engaged in developmental activities in Dakshina Kannada, Udupi, Uttara
Kannada, Coorg, Shimoga and Chickmagalur districts operating in 4,739 villages
covering more than seven hundred and ten thousand families.
It is also working in six coastal towns under Karnataka Urban Development and
Coastal environment Management Project. Throughout the State of Karnataka,
SKDRDP, is operational with its Community Development Programmes. The core
strengths of the organisation are the blessings of its promoters, dedicated band of
workers, good will of the stakeholders and above all a comprehensive programme to
better the living environment of the chosen areas.
.|.,-,!|
|8

||
| To adopt small, marginal and micro land holders as stakeholders and organize them in the
informal sector to promote sustainable farming practices. In the process the SKDRDP is
committed to economically empower the stakeholders to become self reliant.
| To create a conducive environment in the village to enable different sections of the
community to live in harmony. To create rural infrastructure through peoples
participation to improve the living habitat.
| To motivate the individual family to plan for self development and assist them in
realizing their plans. To dare the poor to envision a dream and to work together with
them to make it possible. To work with the unreached, the poor, the backward, the
minorities, the weaker section and above all the women to empower them socially and
economically.
| To promote entrepreneurial skills among the rural poor and escort them to implement the
skills.

c

|#
|
| The small farmers marginal farmers need to be organised to empower them with
knowledge and tools for developing their family and their lands.
| The resources need to be generated within the village and need to be shared within the
village for development.
| Developmental process will result in a change only if it is sustainable socially and
economically.
| Alcoholic abuse is a bane for progress. Progress without morality will never be real.
| The progress can only be achieved through participation and sacrifice and not by
struggles and street fights
| Social empowerment of women will lead to sustainable progress and that social women
empowerment shall precede economic empowerment.
| Everybody is trustworthy and therefore needs to be trusted. That micro credit based
more on trust is the foundation for progress.
|3
"|
| To work for empowering the poorest
| To organize the rural populace in mobilizing the rural infrastructure for development.
| To utilize locally available natural and human resources for progress.
| To introduce gainful sustainable means for development of agriculture.
| To encourage farm sector and the non-farm sector income generation activities.
| To blend morality, integrity and discipline in the process of development.
| To facilitate participatory community and village development programmes

c

|
2 |
|||||
Dharmasthala is a famous Hindu religious shrine of South India with about 700 years of
History. The presiding deity of Dharmasthala is Lord Manjunatha Swamy reincarnation of
Lord Shiva. The temple is managed by the Heggades who is considered to be the speaking
Manjunatha. The Heggade position a hereditary one, is being passed on from generation
to generation. The present Heggade, Dr. D. Veerendra Heggade is the 21st in the lineage.
Dr. Heggade feels that even charity should be put to good use and must yield results. He
has therefore setup several institutions to promote the philosophy of directed charity. The
visionary in Dr. D. Veerendra Heggade has conceived several projects to touch the finer
aspects of human environ. To realise these visions he has promoted many Institutions in
the field of Education, Health, Promotion of Indian Medicine, Naturopathy, Yoga, Life
Education, improving the living environment.

c

|
2|$|
|||||.,-,!|
)
@ >3
<@c6! 2 c6!
2 |!-+'+$|# |'4|
The concept of charity changed to the concept of self help. SKDRDP started organizing
self help groups. Unique model of male member self help groups. These are called
>!
|# |'?|The unique feature of Pragathi Bandhu Groups is labour
sharing. Each member works for the other member one day in a week. This has helped
thousands of small farmers to achieve important farm works. A five year farm plan
prepared by the members in consultation with the group and the Sevaniratha gives the
much needed goal to the families. The Pragathibandhu model of groups is a successful
model developed by SKDRDP and now it is approved by the Government of India and
adopted for the implementation of special S.G.S.Y Project.
|3
"||.,-,!|
| Develop the habit of savings & thrift.
| Provide micro credit assistance primarily for land development, creation of infrastructure
and personal emergency needs.
| Developing self confidence, self reliance and leadership.
| Transfer of governance to village level federation of SHGs
| Promote compulsory labour sharing for performing individual and community tasks.
| Watershed construction and Development programmes.

c

|
2|@ "
||'4|
| Jnanavikasa Kendra is unique centres of socio economic empowerment for uneducated

under employed rural women without lands. In the Jnanavikasa Kendras such women
empower themselves with knowledge on health, family welfare, hygiene, children
education, clean surroundings, better living in weekly interaction of unto two hours with
each other.
| Normally shy woman unsure of herself transforms herself into a confident, self
respecting, determined woman, through her participation in Jnanavikasa Kendra.
Jnanavikasa Kendras are now attempting to train the women in various production
activities like floriculture, dairying, vegetable cultivation, home industries etc., Here
women, not only find source of inspiration but also train to inculcate family values to a
better management. So far 4,031 Jnanavikasa Kendras have been working in 5,556
villages comprising of 11,56,913 women.
3
"||| 4|
| Organize women from the poorer sections, backward classes, minority
community, SC/ST community, landless labourers, beedi rollers, working class women
etc.
| Promote women empowerment, social mobilization process.
| Create awareness in women and family.
| Develop the habit of savings and thrift.
| Educate women about family planning, sanitation, health, education, culture, epics
| Develop self-confidence, self reliance and physical appearance.

c

2|% |||.,-,!|
Smt. Nalini is a member of our Jnanodaya SHG in Balya Village, Puttur taluk. She has
included five of her family member in Sampoorna Suraksha. Her husband Mohan
Gowda met with an accident in his farm and is now being treated in City Hospital,
Puttur. For his treatment Rs. 14,000/- has been sanctioned by Sampoorna
Suraksha.Devasya Shri Koragappa Gowda is a sincere member of the Kukkeshri
pragathi bandhu group of Kodimbadi village of Puttur Taluk. All the five members of
his family have been enrolled in the sampoorna Suraksha scheme. Koragappa Gowda
has only two acres of land, which is bearely sufficient for meeting his daily expenses.
His wife Appi is rolling beedis toget some extra income. Early this year Appi got
admitted to hospital with complaint of chest pain. Hospital Expenditure of Rs. 2,000/-
was met by Sampoorna Suraksha. Later Koragappa Gowdas daughter. Hemalatha gave
birth to a girl child in the hospital .Through ceasarian section. For this Koragappa
Gowda had to spend Rs. 13,000/-. However,he got Rs. 5000/- under the maternity
scheme of Sampoorna Suraksha.Koragappa Gowda believes that by joining Sampoorna
Suraksha, he is able to help the needy.
|

c

|
||3
"4|
| Primary objectives:
To study microfinance in India
| Secondary objectives:
To analyse the financial performance of the top 5 microfinance institution in India as
per the rating given by the CRISIL.
To compare the institutional characteristics, outreach of the microfinance institution.
To know about the various products of the microfinance institution in India.
To understand the functioning of the microfinance institution in India.
||| ||||

1. Study will provide the deep knowledge regarding the microfinance institute and
their working.
2. Data will give information about the various financial aspects of the microfinance
institutes.
3. Clear picture about the top 5 microfinance institution can be concluded with the
help of these study related to the various method, products.
||||$||
| Descriptive research:| Descriptive research, also known as statistical research, describes
data and characteristics about the population or phenomenon being studied. Descriptive
research answers the questions who, what, where, when and how
||||)|%
|| 4|
| Secondary data: Secondary data is data collected by someone other than the user.The
study was based on the secondary data collected from the relevant sources.
| Financial data: Financial data are taken from the microfinance institution websites and
the microfinance information exchange (mix) website

c

|
2|+
|| 4|
| Bar diagram are used for the comparison of the top 5 microfinance institution.
| Ratio Analysis are done for the specific Microfinance Institution for the year 2009.
|||||||||||X|/

:
| The data collected from the secondary source may be not authentic and relevant.
| The given time frame to conduct the study of microfinance may act as a constraint for
the study important aspects may be left to cover.
||||||6|
| Helpful for further detailed study of the development of the microfinancial institutions.
| Helpful for the further academics projects.

c

Analysis and findings are done on the bases of the secondary data and on the bases of
which the relevant charts are drawn to give the clear picture of the microfinance
industry in India. Analysis will be made on the important criteria related to the
microfinance industry in India.
The important criteria are as follow:
|

|

|
A) Branches
B) Personnel
C) Personnel
| |
A) No of active borrower
B) No of outstanding loan
|-
|+
|
Analysis are done by comparing the performance of the top five microfinance institution
with respect to the three years of there working.

c

|
2 |

|%

|
+1|# |||2|

|

|
?45647| | | |
| | | |
8|
666| 59 |
|?45|
:6|?45|
|
|

, #"

, #"

, #"

3 c ; c6#" #@ @ c <'"')
c ;

%
|

4|2 4|# |||

|| || |

4|
1. Sks Microfinance show tremendous growth with respect to the year 2008 to 2010 as
shown in the graph in the 2008 the branches are 1354 which increased to 2407 in 2010
so the increased was recorded as 6667;|
2. Spandana Spoorty was shown the increased of X66; with respect to the data of the
three years.
3. SHARE Microfin shown the increased of the 2; from the year 2008 to 2010.
4. Ashmitha Microfin shown the increase of X2);|of the branches as compared the
year of 2008.
5. The strange case of skdrdp shown the have decreased there no of branches from )||
)| decrease was recorded of 2|

c

|
#1|!|||2|

|

|
|||||| ?=>?=@||| ||||| ||||| ||||
| | | |
A| & & &
???| >B || &
|?=>||
C?|?=>|
||
A> |
& &
&
&
& &
, #"

& , #"
, #"
&

3 D c6#" #@ @ 3
D
D

%

|2 ||||

|| || ||

||
1. Sks Microfinance shown tremendous increase in relation to the recruitment of the
staff and personnel the no are increased from :7 )||6:(2)|
| |2X);|
2. Spandana Spoorty was shown the increase of (:)7||()|

was
tremendous as far the growth considers 6 ((;|
3. SHARE microfin shown the increase of 7(*||)2*|

| |)7 ; in term
of change in percentage.
4. Ashmitha Microfin shown the change of 6X; in the recruitment of the personnel.
5. SKDRDP shown the minimum change in terms of the personnel which was 2();|

c

|
%1|+|||2|

|

|
||||||||||||| ?EFGEH| ||
|| ,

I|
GGG| FJ ||
|?EF||
G|?EF|
||
|

S00 MK,

V 00 WX

V 00 WX

O O
3 4 KL K c N P RS R c+ TPTU
4 MM
Q
M K Q
M K
% L

|2 |+||

|| || ||

|
1. Total assets of the sks was increased from the (|

||26|

| ||
||)6X;|
its total assets.
2. The assets of Spandana Spoorty also increased its total assets by 7|| ||) ;||
3. Total assets of SHARE microfin also increased ||| |

||| |
| |X;|
was very efficient.
4. Total assets of Ashmitha Microfin ltd increased from *|| 2|

| |)(;.
5. SKDRDP also increased assets from 2*||7(|

| |X2;|
|

c

|
2| |
+1|&||
"||||2|

|

|
?YZ[Y\| | | |
| | | |
]|| && && &&
| || && &&
|Y||| && && &&
|?Y|
|
| && && &&
&& &&
&&
&&

&& &&
&&

&& &&
&

&& && &&

&&

3 ^ c6#" #@ @ c _'"')
^

%

|2 ||||
"|||

|| ||
|

4|
1. Sks no of borrower has increased from 2:(:7X||XX:X:((( in the last three years
recorded the increase of )6;
2. Spandana Spoorty has also increased clients from )::(((||) :6:|

| |
) (6;|
|| |||
3. SHARE microfin also increased the no of clients from 2:(:) 7||6:27:X )|
|
|)22;||
4. Ashmitha Microfin also increased the no of client initially it |): X:7*|

| |

||X:*):2( in terms of **X;||
5. SKDRDP has shown as the increase of 7:( :26|| :2:2(|

| |*2(;||

c

#1&||
| |||2|

|

|
?``| | | |
| | | |
a| && &&
| | && && &&
|b| && && &&
|?b|
| && && &&
| && && &&
&&
&&
&& &&
&&
&&
&& &&

&& &&
&&

&& &&
&&

&&
&& &

3 c c c6#" #@ @ c d'"')
c c

%
|' -½|2||&|| $$+&,&'|/+&||

&$$ $&|-|/+$|$-½½|A½+-||

|
1. The total amount of outstanding loan in SKS has been increase from 2:(:7X||
6:*6:(((|
| |2)(;||
2. The Spandana Spoorty also shown the increase of the loan amount by 2):():2|
|*:*(:(((|
| |))X6;|
3. SHARE microfin shown increased the outstanding loan amount by )(:6:22|

|
|)X)7; .
4. Ashmitha Microfin also shown the increase of outstanding loan amount |(:2X:777|
|(:27:*X(|
| |X);|
5. SKDRDP has shown the increase |X(6 ;|

|
| | ||
|
||

c

|
2|-
|+
||||2|

|

|||
|((*|
,
|||-
| 4|
1.
| 5

is a percentage (%), which indicates whether or not
enough revenue has been earned to cover the Microfinance Institution's (MFI's) total
costs ± operational expenses, loan loss provisions and financial costs.
4|||||||||||
|"|
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB |

| C
||| |C
| |
|
|
|
2| -| | +: Return on Assets (RoA) Ratio is a percentage (%), which
measures the net income earned on the assets of a Microfinance Institution (MFI).
Simply put, it measures how well the institution uses all its assets.
4||||||||||||&|
| ||
| BBBBBBBBBBBBBBBBBBBBBB |
| ||||||||||+" | ||
|
|
|
3. -||½
:|Calculate the rate of return on the average equity for the period.
Because the numerator does not include the non operating item or donation it is net of
taxes, the ratio is frequently used as proxy for commercial viability
4|||||||||||||||||||||||||||| &|
| |9$ |
||||||||||||||||||||||||||||||||||||||||| BBBBBBBBBBBBBBBBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||||||||||||||||| |||||||+" |½
|
4.| !
| | +:| It explains about funds should be used to create assets that
produce the most revenue which are productive (are most ³productive ).
4||||||||||||||||||| |||||'|/ |!

|
| BBBBBBBBBBBBBBBBBBBB |
| ||||||||||||||||||||||||||||||| ||||||||+|

c

5. ,| <½
|
:| It explains about the MFI must also make sure that it has
sufficient funds. Available (³liquid ) to meet any short-term obligations.
:|D||||||||||||||||||||||||| |/

||
||||||||||||||||||||||||||||||||||||||| BBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||||||||||||||||||| ½
|
|

c

2| |.0 |.

| 1|
Profitability and sustainability ratios reflect the MFI¶s ability to continue operating and
grow in the future.
|
|5

|D||||||||||||||||||||||||||||||||||||||||
|"|
||||||||||||||||||||| BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||||||||||||||| |||||
| C
||| |C
| ||
|
Item Rs
Finance 958,845,5611
Revenue
Finance 345,364,9446
Expenses
Impairment 517,178,300
loss on
loan
Operating 293,307,6894
Expenses
D 76;|
|
+
4||
Measures how well a MFI can cover its costs through operating revenues.sks manage
13.87% of its costs through its financial revenues.
|
|-||+|D|||&|
| ||
| |||+" | ||
Item Rs
Net 267,701,98652
operating
Income
Average 403,772,61309
Assets
=XX;|
+
4| Measures how well MFI are uses its assets to generate return these ratios is
net of taxes and excluding no operating items and donations.Sks uses only 6.63% of its
assets to generate the return from it.
|
|
|
|

c

|
|
|-||½
|D|&|
| |9$ |
|||||||||||||||||||||||||||||||||||||||||||||| +" |½
||
Item Rs
Net 267,701,98652
operating
Income
Average 958,031,8683
Equity
=|6*);|
+
4|Calculate the rate of return on the average equity for the period. Because the
numerator does not include the non operating item or donation it is net of taxes, the ratio
is frequently used as proxy for commercial viability.Sks generate 27.94% of the return
from its equity.
.
)|!
||+|D|'|/ |!
|
| ||||||||||+||
Item Rs
Gross 543,400,00000
Loan
Portfolio
Assets 574,300,00000
||||||||D*)X;|
|
|+
4|It explains about funds should be used to create assets that produce the
most.Revenue (are most ³productive ). Sks uses the 94.625% of its fund for the
productive use of the assets
|
|
2|,<|
|-
|D||||/

||
||||||||||||||||||||||||||||||||||||||| BBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||| | |||||||||½
||
|
Item Rs
Liability 684,833,058
Equity 213,0379,96
|||||||||||||||||
|
|
|

c

|
|
|
|
||D ;|
|
+
4||It explains about the MFI must also make sure that it has sufficient funds.
Available (³liquid ) to meet any short-term obligations.Sks has only 3.21% of the funds
to meet the short term liability.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|

c

|
|
2 ||

|/

|
|
|
|5

|D||||||||||||||||||||||||||||||||||||||||
|" |
||||||||||||||||||||| BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB |
|||||||||||||||||||||| ||||||||||||||||||||||||||
| C
||| |C
| |
|
Item Rs
Finance 151,616,597
Revenue
Finance 466,484,99
Expenses
loss on
loan
Operating 74,29,843
Expenses
D 67;|
|
+
4|Spandana Spoorty utilizes the 1.78% of its financial revenues for the payment
and covers the expenses of the firm
|
|-||+|D|||&|
| ||
| ||||||||||||BBBBBBBBBBBBBBBBBBBBBB |
| |||||||||||||||||||+" | ||
Item Rs
Net 431,26,416
operating
Income
Average 291,068,64427
Assets
D||| )7;|
|
+
4|Spandana Spoorty gets 14.8% of the return from its assets.
|
|-||½
|D|&|
| |9$ |
|||||||||||||||||||||||||||||||||||||||||||||| +" |½
||
|
Item Rs
Net 431,26,416
operating
Income
Average 485,106,7697
Equity

c

||
|
|
|
||D77*;|
|
+
4|Spandana Spoorty gets 8.89% of the return from its equity||
|
|
)|!
||+|D|'|/ |!
|
| ||||||||||+||
Item Rs
Gross 354,050,72659
Loan
Portfolio
Assets 291,068,64427
D X;|
|
+
|4|Spandana Spoorty should use 121.63% of the fund to create the new assets
for the productive use.
|
2,<|
|-
|D||||/

||
||||||||||||||||||||||||||||||||||||||| BBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||| | ½
||
|
Item Rs
Liability 291,068,64427
Equity 485,106,7697
|D|X((;|
|
+
: Spandana Spoorty get the 6.00% of the fund should be kept with the firm to
meet the short term obligations.
|

c

|
2|+-½|

|/

|
|
|5

|D||||||||||||||||||||||||||||||||||||||||
|" |
||||||||||||||||||||| BBBBBBBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBBBBBBBBB |
|||||||||||||||||||||||||||||||||||||||| ||||||||
| C
||| |C
| ||
Item Rs
Finance 469,345,0969
Revenue
Finance 177,987,9945
Expenses
loss on
loan
Expenses
D 2)*;|
|
+
4|Share microfin uses 1.549% of its financial revenue to cover its financial
expenses
|
|-||+|D|||&|
| ||
| |||||||||||||BBBBBBBBBBBBBBBBBBBBBB |
| ||||||||||||||||||||| +" | ||
Item Rs
Net 108,722,6860
operating
Income
Average 259,438,52238
Assets
|||D) *;||
|
+
4||Share Microfin generates 4.19% of the return from its total assets
|
|-||½
|D|&|
| |9$ |
|||||||||||||||||||||||||||||||||||||||||||||| +" |½
||
|
Item Rs
Net 108,722,6860
operating
Income
Average 292,203,2279
Equity
||||

c

|
|
|
D6 ;|
|
+
: Share microfin gets 37.21% of the return from its equity
|
|
)|!
||+|D|'|/ |!
|
| |||||||||||||||||BBBBBBBBBBB||
||||||||||||||||||||| |||||||||||||||||||||||||| |||+||
|
Item Rs
Gross 16,932,809,253
Loan
Portfolio
Assets 259,438,52238
DX27;|
|
+
4|Share microfin uses 65.82% of its fund to create the new productive assets
2,<|
|-
|D||||/

||
||||||||||||||||||||||||||||||||||||||| BBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||| | |||||||||½
||
|
Item Rs
Liability 230,218,19959
Equity 292,203,2279
=677;|
|
+
4|Share Microfin keeps 7.88% of the fund for the short term liabilities or to pay
short term debt

c

2)|+
|

|/|
|
|
|5

|D||||||||||||||||||||||||||||||||||||||||
|" |
||||||||||||||||||||| BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB BBBBB|
|||||||||||||||||||||| ||||||||||||||||||||| |||
| C
||| |C
| ||
Item Rs
Finance 12,54,580
Revenue
Finance 7,821
Expenses
Impairment 1,22,913
loss on
loan
Operating 8,24,414
Expenses
D );|
|
+
4|Ashmitha uses 131.34% of its financial revenue for the payment of it
financial expanses
|-||+|D|||&|
| ||
| |||||||||||||+" | ||
Item Rs
Net 2,38,208
operating
Income
Average 49,234,3333
Assets
||D)7;|
|
+
4||Ashmitha Microfinance gets only 4.8% of the return on its assets
|
|
|
|
|
|
|
|
|
|

c

|
|
|-||½
|D|&|
| |9$ |
|||||||||||||||||||||||||||||||||||||||||||||| +" |½
||
|
|
Item Rs
Net 2,38,208
operating
Income
Average 60,764,214
Equity
|||D*(;|
|
|
+
4||Ashmitha Microfinance gets 39.20% of the return on its equity invested.
)|!
||+|D|'|/ |!
|
|||||||||||||||||||||||||||| ||||||||||||||||||| +||
|
Item Rs
Gross 406,579,813
Loan
Portfolio
Assets 492,343,333
D72;|
|
+
4|Ashmitha Microfinance uses its 8.25% of the portfolio income to invest in the
assets that generate return||
|
2,<|
|-
|D||||/

||
||||||||||||||||||||||||||||||||||||||| BBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||| | ||||||||½
||
|
Item Rs
Equity 607,64,214
D6( ;|
|
+
4 Ashmitha Microfin uses 7.012% of the amount for the payment of the short
term liability

c

22|.,-,!|0
|. |,"|- |
,"|!3 1|
|
|
|5

|D||||||||||
|"|
BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB||||||||||||||| |||||||||||||||||||||||

| C
||| |C
|
Item Rs
Finance 763,941,922
Revenue
Finance 400,584,215
Expenses
loss on
loan
Expenses
D 6(;|
|
+
4| SKDRDP uses 112.70% of its financial revenue for the payment of the
financial expenses
|-||+|D|||&|
| ||
| ||||||||||BBBBBBBBBBBBBBBBBBBBBB |
| ||||||||||||||+" | ||
Item Rs
Net 769,61,00
operating
Income
Average 744,260,7932
Assets
D (;|
|
+
|4|SKDRDP gets the 10.3% of the return from the assets in which it had been
invested.
|
|
|
|
|
|
|
|
|
|

c

|
|
|-||½
|D|&|
| |9$ |
|||||||||||||||||||||||||||||||||||||||||||||| +" |½
||
|
|
Item Rs
Net 7,696,100
operating
Income
Average 355,971,119
Equity
D 7;|
|
+
4|SKDRDP gets only 1.28% of the return from the equity invested
|
|
)|!
||+|D|'|/ |!
|
| ||||||||||+||
|
Item Rs
Gross 614,868,8115
Loan
Portfolio
Assets 744,260,7932
D7X;|
|
+
4|SKDRDP uses its 82.6% of the portfolio for the purchase of the assets .
2|,<|
|-
|D||||/

||
||||||||||||||||||||||||||||||||||||||| BBBBBBBBBBBBBB |
||||||||||||||||||||||||||||||| | |||||||½
||
|
Item Rs
Equity 355,971,119
D ** ;|
|
+
4|SKDRDP can use 19.91% of the fund to meet the short term liability.

c

$|
| ||| |
|||
||||

|
|| e|| || | || |

?f||

|| -g -g - g - g - g
||| - g - g - g -g - g
|| || -g -g - g - g - g
|| -g - g - g -g - g
||
| - g -g - g -g - g
1. Operational ratio Ashmitha Microfinance uses the most of its financial revenues to cover
its expenses.
2. SKDRDP gets maximum return on its assets.
3. Share Microfin gets the maximum return on the equity.
4. Spandana Spoorty assets yield most productive return.
5. Debt/Equity ratio of the SKDRDP was the highest.

c

|
%
||
|
The conclusion is divided into several questions that are arises when the project started
and the answer is follow:
Poor people in developing countries usually do not qualify for any type of services from
the formal banking sector: they typically have no credit history, and most are not
employed in the formal sector, so there is no record of employment. Moreover, they are
unable to provide collateral. And in many parts of the world, opening a savings account
at a traditional bank requires a certain amount of money be deposited and poor people,
although statistically excellent savers, do not have the large sum of money required to
open a savings account.Yet, people living in poverty, like everyone else, need access to
a diverse range of financial services to help run a small business, manage risks, and plan
for a more stable future.
Like other financial institutions, MFIs charge an interest rate for the loans they give
their clients. This is a way for the MFI to be self-sustaining so that it can be a stable,
long term provider of finances in its area of operations. A self-sustaining MFI is critical
to the health of the sector and for it to continue to provide microfinance services to its
clients. However, because managing many small loans costs more money for any
institution than managing one large loan, an MFI typically needs to charge higher
interest rates to cover their costs.
Poverty is a very complicated issue, and many different approaches and tools are
required to address it. Microfinance is one tool that is appropriate for millions of the
working poor to lift themselves out of poverty. However, microfinance is not the only
answer, and in fact is not always appropriate. For instance for the extreme poor, or those
who are sick and/or unable to work, microfinance may not be an appropriate tool.
In the increase of the branches SKS was top among the other microfinance institution in
India from the year 2008 to 2010 it was increased by the 77.78%
Personnel of the Spandana Spoorty was increased by 71.00% with comparison to the
other microfinance institution in India
Share Microfin was top among the increase of the assets it was recorded as 63.33% as
compared to the other microfinance institution in India.

c

Outreach of the SKS was increased by 47% which was highest among the other
microfinance institution in India
SKDRDP had the highest amount of loan outstanding as compared to the Microfinance
Institution in India
Ashmitha Microfinance limited had 131.34% of the operational sufficiency ratio it

means that Ashmitha uses most of it financial revenues to cover it financial expenses it
does not has any other source.
Spandana gets highest return on assets which was 14.8%
Ashmitha microfinance gets highest return on equity which was 39.20%
Portfolio on assets of Spandana Spoorty Microfinance was higher it was 121.63% as

compared to other microfinance institution.
Debt equity ratio of SKDRDP was highest it was 19.91% as compared to other
microfinance institution.
|
|
|
|
|

c

|
#

|
|
||
|
|
http://www.microfinanceinfo.com/microfinance-products/
http://www.cgap.org/p/site/c/template.rc/1.26.11415/
http://www.sksindia.com/
http://www.spandanaindia.com/
http://www.sharemicrofin.com/
http://www.skdrdpindia.org/
http://www.asmithamicrofin.com/home.html
http://www.microfinancefocus.com/
http://microfinancehub.com/
http://www.scribd.com/doc/15792568/Full-and-Final-Micro-Finance
||||
|
1.| M.Y KHAN & P.K.JAIN ³Financial Management fifth edition Tata McGraw Hill
Education Private Limited, New Delhi
2.| Marketing Research ,G.C.Beri ,Third Edition ,Tata Mc Graw Hill Education Publishing
Company Limited , New Delhi

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c 

(Women running own kirana store)

(Women running own cobbler store)

(Women running a toy store)

| | || |

 || | 

| Estimated that 350 million people live Below Poverty Line

| This translates to approximately 75 million houses.

| Only about 5 % of rural poor have access to micro finance.

Name SKS Microfinance Ltd

Name Share Microfin Limited

Name Asmitha Microfin Ltd

Shri Kshetra Dharmasthala Rural

1. Financial institution, Donors, Private equity is provide funds to the various

| l|liilit|  t| |t | ill

Mi i|i ||lti l||

2.3 Different Working Model of Microfinance

2. Grameen Bank Model (Joint Liability Group Model)

3. Regional Rural Bank (RRB) Model

4. Co- operative Model

5. Individual Rural Volunteers (IRV) Model

6. Micro Finance Institute (MFI) Model

2.3.1 Self Help Group (SHG)

| Affinity group of 10-20 members

| Weekly group meetings

| Leader elected by group members

| Small and regular savings

| Group has a savings bank account operated by group representative

| Internal lending to members from own savings

| External loan to the Group as a whole

| Disbursement of loans to members at the discretion of group

2.3.1.1 Various SHG Bank Linkage Model

| Modified NGO Model

| Indirect NGO Model

| IFAD (International Fund for Agricultural Development) Model

| SGSY (Swarnajayanti Gram Swarojgar Yojana) Model

Explanation of the figure by symbol

     

 c     c  

 c  ! 

2.3. 1.2 Explanation by symbol

4. NGO (Non Government Organization)

9. Credit and Savings

10. Technical Support

11. Job Work

Self Help Group Bank Linkage Model

| Weekly group meetings

| Established methodology for

| Collections enforced through

| One time membership fees

Grameen Bank credit delivery system has the following features:

1. There is an exclusive focus on the poorest of the poor:

2. Borrowers are organized into small homogeneous groups :

4. Simultaneous undertaking of a social development agenda addressing

5. Design and development of organization and management systems

6. Expansion of loan portfolio to meet diverse development needs of the

i) credit for building sanitary laterines

| 5 member Joint liability Groups

| Weekly group meetings

| Established methodology for

| Collections enforced through

| One time membership fees

c

| | |||

|| |

|l|liilit|t| |t | ill

Mi i|i||lti l||

c c

c !

* +c%# 2 30! " 4 8, #"c%#

-./%#$#' -.0 " . ./%#$#'.

$| | '

$|½ | / is available to all clients over the course of a fiscal year.

7| ± A service for transferring money, mainly overseas to family or

Provides self-employed women financial assistance to support their business

2.Available any time after the completion |(||=||)(| of an IGL

Provides self-employed women financial assistance to support their business

|½ |/ | |+" |9|- |

1| emergency loans range from Rs. 2((||-|:(((

2.Term of the loan is (| with a bullet repayment.

1.|| ||-|2((|

2.$||2| with principal repaid weekly.

1.| Financing |

2.| Loan amounts range from Rs. :2((||-|:(((|

3.| X );| |

)| Term of 2||

1. Working capital loans ranging from Rs. :(((||-| :2((|

3. Term of the loan is )| |

1.Loans range from Rs|2(:(((||-| 2(:(((|

2.Members must have completed at least |'/|cycles to qualify or one ILP to be

5. In addition, loan processing fee of ;| ||

1. Weekly payment of -|(| the term of five years.

) |||% ||||

& : Spandana stands for µ

9 cd

This loan is offered to low/lower-middle-income people running micro-

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