Swayam: Dr. Ajit, co-founder/CEO (?

) April 30th, 2:30pm

We are a section 25 company, we are not-for-profit. We do commercial business but none of our directors or promoters take profits. Our director you met she doesnt take a salary from us, she only takes allowances for travel. One of our other directors, she goes to every disbursement. Most of our promoters are women. Out of 5, 3 are women. Promoters are investing in the MFI. Promoters spend 15 to 20 days in a month in our organization to look at our accounting and MISS. Another director does social activities. Her husband is the chairman and also head of Gujarat Banking Financial Lmtd. Two promoters try and find funds. One of them helps mfis get established in Gujarat. The funds come from State Bank of India and also 1.5 crore from Mass financial services. They give money to MFIs and do commercial finances. Since were new, most of the banks are reluctant to give money, and after 2010, the AP crisis, that hesitance has increased. We get some donations from Sangam management services. No grants from government. Because if they give a grant they want to push their products and we cant fulfill our mission. There might be some political interference. Some of our promoters have good relationships with IS officials Indian state officials. We dont want any political interference, we dont get any funds from there. We want to do it on our own Mission: We want to empower them by giving them financial services to their doorstep and also help them in social empowerment and financial empowerment. Both are required. Financial empowerment leads to social empowerment. If she knows finance. Emp. She will know profits and losses. She will know the pros and cons of business and will help her grow like having decision making in family and community. She will also learn how to take loans. Some women are leaders in the groups and can give the rest guidance and how to solve their financial problems. This is a type of empowerment. The group can go to a dealer to get a machine and will get a discount because of a leader from the group. This helps women get leadership. She also does decision making, she gives money to husband, helps to educate her children or girl child, start small business. If she learns, she can increase her family business and earning. Thats one type of social empowerment. (10:17) Genesis of Swayam: Started in Feb 2011. I started my microfinance career in 2006 with SKS. They had a 3lakhs client base and 150 crore loans outstanding when we joined, but every year they would double loans outstanding and client base. When I left in 2010, there were a 15 lakhs client base and 4,500 crore loans outstanding in 4 years. I joined another emerging microfinance company that used to integrate technology. They did loan collection with mobile phones. It saved a lot of time. That fascinated me. It was similar to SKS in 2006 but with 80 crore loans outstanding. There was a plan to expand and technology was strong so it was going to grow.

When I started with SKS, it was small. Swayam is a different cup of tea. Swayam is so small, 4.5 crore portfolio and 6,500 members. I joined Swayam to start something of my own. I was like a founder member but I wasnt so directly involved. SAATH does opposite of what we do, after they take deposits they take loans. When I came to Gujarat in 2010 I met Mr. Patnaik. When I visited Gujarat I saw a lot of mf potential here. Theres a lot of demand of MF. Still now, this is an underpenetrated district. Women are entrepreneur. I have worked in Orissa, Bengal, Rajasthan, and Gujarat. Most states they depend on their husbands. They do their own thing. In general Gujarati women are entrepreneurs, they keep the money and dont give to their husbands. (Why?) Their mindset is that they want to grow money. Gujarat is a business minded state from the ground level itself, everyone wants to make money. Here when a student passes 10th, students search for a visa to work abroad. After seeing one person, the other one goes. If three or four people go in one village go, a bunch go. There was a demand for loans. They didnt get loans before, there were hardly good operating MFIs. Maybe no more than 10. Theres a lot now, they see the potential for growth of their business. Most are for-profit because big players are coming Spandana, Bandhan NBFC, equity firms. You give ten rupees to a woman, shell keep the ten rupees and spend in time of need. Men will spend on a bunch of things and bring home 5 rupees. So we know these women save. We know our money will be used well. Men wont utilize us that well. When I was in SKS and started both genders in 1999 or 2000 and found that women are capable of repaying loans than men. Men sometimes forget. Default rate? Women dont default, we didnt find. In West Bengal, its a different issue with the communist parties. The woman peer pressure is there and its more than men pressure in groups. It is a tool for poverty alleviation till it meets the demands of customers, not demand of company. We are new, so were still meeting demands of customers. When we grow big, then well have the discussion with private equity players. There is pressure from private equity companies to give bigger loans. Demand is only 10,000 but Ill give you 20,000 and youll spend half on other activities. The pressure from above. Ticket size and total loans outstanding are of concern. We want to start off with some money, but no private equity. We dont pay back the loans till later with some interest. The promoters are the ones who started this, no extra player. We need equity because we have a constraint of equity. (33;41) skipping SIDBI will give us equity. We have already approached SIDBI for equity offers. We need to transition into for-profit if we want to expand. Maybe next year. Ujivan started as an non-lending financial company (?). I dont think 100% of our demand can be fulfilled without banks help. Bank needs to convert us to NBFC so we can give higher loans. We have to get money from banks. If we get from private equity, it will be higher interest rate. They give us loans at about 6% so we can give loans with 18% diminishing interest rate. Private equity requires loans. We havent thought of private equity yet, thatll be in five years at all.

From what Ive seen after 2010, FP is the best way to go. It changed everything. In 2008, in Kolar in Karnataka most of the clients are Muslims. In Islam, they are against giving or taking interest. So some imams said dont give any interest to any MFI. So theyd already taken all of them, but they werent supposed to give interest. (So why would they take the loan knowing the business) They need the money. Example of Grameen Bank. They also had the same problem. 3 4 months they had a revolt. They wouldnt repay anything because they included the process fees and all. 300crore portfolio was lost in Kolar in Karnataka, near Bangalore. When they saw nobody Is giving credit to them, and the credit bureau kept track of them, they realized. AP people are crying cuz nobody is giving them money. Somebody religious told them not to pay. Nobody paid. So the microfinance bill came out registering all MFIs under the bill. If the gov approves them, they can lend them. Almost nobody lends in AP. (What does that mean for NPs?) Most of the AP MFIs because their portfolios are wiped out since nobody played. Only the big players are left. SKS wrote of 7,000 million rupees. Due to IPO, it survived. The IPO happened before the incident, otherwise it wouldve dropped. Only informal money lenders give money in AP with really high interest rates sometimes 100% or 200%. Now the credit bureau is there after the AP crisis. Here, the gov isnt doing anything for non-profit. Theyre not supporting, theyre not opposing. Sometimes when NP is there, they ask why are they charging this interest rate as a NP. The government might think its too high, were like a NGO so people wonder why were charging a high interest rate. No profit is shared, the profit is for other loans. CashPro is a nonprofit, it has 2000 million RS. loans outstanding. Its a good example. Almost all other non profits arent sustainable or they turn into FP. Some nonprofits in Orissa have just not expanded. If we give some sharing to promoters or banks, then they can invest in our org so our company to grow. There are shares now, only 10,000 shares of 10 RS each to all the promoters. In future we may give shares to borrowers and staff. Targets: We used to do a secondary survey, whats the women population in that location and if theyre working and if there are bad loans deferred payments. We can just discuss with players and staff and find out. Gujarat Microfinance Association is there. If there area is okay, then well go there. We see the potential of the area after the colony survey. After that the staff does a survey to see whos interested and conduct meetings to introduce us. We only give loans for income purposes. Before giving loans we have criteria. So we ask about their daily income and calculate their montly wages like 2500 rs a month. Husbands might be 4000 rs. A month. We calculate the expense and find out what other loans they have. This is to find out if they can repay the loan. Income minus expenses must be greater than loans. Our staff does surprises checks up to 15 days after the loan disbursements to make sure the loan is used properly. If she doesnt pass the test, both parties are in trouble. Then we would stop giving the loan. We check to see if her income as gone up after cycles. Every cycle Income goes up, sometimes up to 30% but usually around 15%. If required, she can use it for emergency loan. But only 30% of the loan can be used for emergency loan. Loans of 10,000 to 24,000 Rs. This is only JLGs and we plan on starting individual loans. There are a lot of pressure for individual loans for women. Someone wants to start a shop or tea stalls and those are bigger loans. Embroidery loans cost 30,000 or 40,000 Rs. We decided she should be a loaning client with us for at least 2 years, 2 cycles. So we know each other well. We will be flexible after some time but not now. The problems of loan repayments happen from 6-12 months of

being a member. After 18 months there are hardly any cases of bad repayment habits. This is a finding of RBI. Good repayment up to 6 months and after 18 months, so thats why after 2 years well consider individual loans. They pay every fortnight, every 15 days monthly twice. We are planning to give 3000-5000RS loans for education with Ramdey from Bangalore to provide such services, with interest rates of 10 12 % diminishing. We are also talking with a housing finance company for ticket sizes of 50,000 2 lakhs Rs. So we are partnering with these organizations to be able to reach the demand. We take the repayments and give it to those partners. Housing Finance Company: Mr. Kashyup We are working in a group lending model. We odnt have any groups so were partnering with these NGOs and MFIs that have a good member base and good reputation. So we provide loans with their members in this partnership. Swayam is working with a JLG model so we give loans to 3-4 members so we give total disbursement of 3.5lakhs. On recommendation of NGO, we give loans to 3-4 members who are willing to pay. Appraisal and loan disbursement is done by the HFC. Partner (swayam ) does document collection and collection of repayments. Swaryn parvith housing finance company (?). By default, microfinance in India targets only women. This is the same story you can read everywhere. You can find generally. I am telling you on my personal experience. I spend some part of the money on useless things cuz I have some habits and I buy things that arent for the family that they think are useless. So this happens in urban and rural settings. You cant manage a group of men. They have different settings and mindsets. In the village, there are drinking habits as well. Theres animosity that happens and some men dont talk to each other. Females dont mind and they will talk secretly. This is why the experiment with male SHGs failed. Its easier to handle a group of women than a group of men. We get money directly from the women. We are only disbursing loans through bank accounts. Suppose a woman doesnt have a bank account, she is now required to open a bank account. This is indirectly towards financial inclusion. We are very particular that they use the loans properly. We take a picture before disbursement of the house and after. How does Swayam get money from this? (1:07:00 skipped). Sanctioning power is with HFC. Were helping them to meet basic needs. They cant do anything because the loan size is so small. No more than 50,000. Thats imposed on microfinance companies. For housing you can loan depending on the capacity of the client. We are for-profit. Banks wont give these kinds of loans to the poor. Most of our focus are on urban slums, we opened a rural branch in Kuddhi. Urban are mostly in Ahmedabad. 6000 client base in Ahmedabad

HFC: Mr. Kashyup Discussion of SHGs vs. JLGs JLG works when a population is dense, for a sparse population SHGs are best. I worked on a branch that closed also. I saw that it was a very different area to work. We were working with tribals that collected

honey that was very good. Theyre marketing their products through the NGO, they did capacity building and all. So whatever theyre collecting, theyre sending it abroad. (financial literacy training here?) In JLG, capacity is not the requirement and not the priority. Its about financial literacy and inclusion. Capacity building is: We give loan to someone, you have to use it for this purpose. Some ladies dont work or dont have skills, or theyre making pickles. How do they get raw materials, how do they preserve it, how do they market it, where do they sell it? They need to know where supply is less. Its about marketing but first developing the skills. Some have skills but its not fitting the market standard. Some things arent sustainable because of bad marketing and not getting the raw material from the right place its very costly. They need to learn how to reduce their costs. Products should attract customers. These products arent sophisticated or polished. Capacity building needs to address these things. Through capacity building this honey tribal group is selling honey to Japan a place with high product standards. JLGs are just lending money, not trying to build capacity. Thats why theres not much difference between a MFI and a money lender the difference is the interest rate and the difference in organization: One is organized, one isnt. (Maybe were giving this model a lot of creditit doesnt have the capabilities that it has) JCRS theyre gonna give some subskill trainings with women. Were working with them to get some capacity building. How to develop their embroidery work to be better in the market, how to get more milk, give computer training (do they even have access to computers). Maybe in 8 10 months time. 150 million rs? By next year well have 33,000 clients next year, we have 8000 now. Well give smaller loans to other states like Bihar and Orissa. Which one is more appealing: giving bigger loans or reaching more people? We want to give our clients better services. We will be moving out of Ahmedabad after two years. 24,000 ticket size is for 2 years. We are thinking of seasonal loans for different festivals. Short time, but bigger loans. The maximum interest rate for 26%. Its more profitable to give bigger loans because our costs would be lower. We would employ less people. Administrative costs would be lower. If we became bigger, our administrative costs will be higher.