Realizing the importance of MFIs in the delivery of financial services to the poor and their potential for expansion of services in remote and lesser-banked areas, NABARD has been extending technical and fund support to this sector. Some of the concerns that necessitated NABARD to commence this support in 1993 were: 1) the need to provide timely credit to the poor in under banked regions and ii) to further improve the outreach of rural credit delivery system through alternate credit delivery mechanisms.
NABARD's support is being provided to various forms of microfinance institutions covering MFIs, second tier MF lending institutions, Grameen bank replicators, NGO-MFIs, SHG Federations etc. NABARD provides loan funds in the form of Revolving Fund Assistance (RFA) to NGO-MFIs on a very selective basis. The RFA is generally provided for a period of 5 to 6 years and is necessarily to be used for on lending to mF clients (SHGs or individuals). In addition, the agencies are also sanctioned, on a case-to-case basis, grant assistance for partly meeting the salary of field level staff, infrastructure development and operational deficits during the initial years.
Cumulatively, as at the end of June 2004, Rs 26.98 crore (Rs 269.80 million) has been sanctioned as RFA to 31 NGO-MFIs and Rs. 0.58 crore (Rs 5.8 million) has been sanctioned as grant to various NGOs. The amount excludes Rs 3.4 million sanctioned under SHG Post Office linkage programme in Tamilnadu.
During the year 2003-04, loan support of Rs. 84 million was sanctioned to two agencies viz.
1) Friends of World Women Banking, India (Rs. 74 million) for on-lending to small NGOs &
2) Kalanjiam Development Financial Services-a section 25 company promoted by DHAN Foundation (Rs 10 million) for on lending to SHGs.
NABARD also provides technical support in the form of capacity building of staff of MFIs and also bankers in appraisal of MFIs for providing wholesale resource support. Since 2002, training programmes on "Appraisal of MFIs" are being conducted through Bankers Institute of Rural Development (BIRD), Lucknow. These training programmes are intended to equip the stakeholders to appreciate the nuances in financing NGO-MFIs and also enhance the flow of loan able funds from mainstream financial Institutions like banks. Specially designed capacity building programmes are also being organized for Chief Executives & other staff of NGOs on
promotion as well as managing of self help groups on a regular basis through our regional offices, in association with reputed resource NGOs & training establishments.
22. Business Model of KDS MFI
A) Introduction: Kotalipara Development Society (KDS) is basically a NBFC (Non Banking Financial Company). They provide minimum loan of 1000 and maximum 40,000. MAS Finance is one of the blooming private MFI in the current era. They are having a sufficient amount of capital with them for their future growth.
Kotalipara Development Society registered as a Society (NGO) under West Bengal Society Registration Act 1961 came into being in 1989 and was in 1991, K.D.S. is a Non-govt. Social Service Organization working in the field of Rural Development for the poor people. Community development and also poverty alleviation is the main focus of this Organization.
K.D.S. is a multi service NGO having under taken interventions in the field of primary health care, education, Child right, mother & child health care, Control of Blindness, Vocational training, water harvesting environment conservation and Micro- credit. Although K.D.S. is basically based on the main principle of causing social-economic empowerment of the poor.
B) KDS Vision: KDS' vision is to poverty alleviation, women empowerment & egalitarian Society free from exploitation and every body in this global life with humanity and prosperity.
C) KDS Mission: KDS envision itself as a financially self sustainable Micro-finance Institution with a wide base of ownership. It is committed to strengthening the Socio-Economic status of the poor women in rural and urban areas by providing technical and financial services on continued basis for establishing their identity and self-image. It constantly endeavors by cost-effective Methods creating a culture of competence and excellence.
D) Legal Status: Registered under Society Registration Act, of 1961.
E) Objective:
1. Women Empowerment: KDS Believes that ―Women participation is the most effective instrument in bringing about change in their way of life both economic well-being and adoption of new practices in changing the socio-economic environment. In order to bring about women participation and their decision making and negotiating power about their rights in all walks in life.
2. Women Health: Health leads to prosperity. Low endowments, production possibilities, and exchange option for women from disadvantage section in rural marginalized the women; this marginalization often results in neglecting the health issues of women and children.
3. Women Economic Development: Our objective is to strengthen women‘s economic capacity as
entrepreneurs/producers, off farm economy and traditional activities. KDS is committed to address factors leading to feminization of poverty and gender inequality.
4. Women and natural resources: Our observation is that women are most effective by degradation of natural resources. We are promoting environment awareness and natural resources conservation activities through women‘s participation at village level.
F) Role and Function:
*Helping in eradication of poverty.
*Providing finance for the enlistment of the individuals.
*Helps the borrower in establishing their business.
G) ADDRESS:
2) Reg. Office: Pioneer Park (Mat) Barasat Dist-North 24 Parganas, Kolkata--124
1. KDS has been established in the year 1991.
2. Directly started implementing Micro-finance since 1997.
3. KDS provides financial Sustainable Development Approach for “Poverty Alleviation & Women Empowerment”.
4. Financial Services to the poor women, landless, Asset less.
5. Monthly family income not more than INR Rs.2500/- in rural INR Rs.3500 in urban.
6. 100% women and possesses not more than 50 decimal of land.
7. SHG Model is largely based on ASA, Bangladesh.
8. KDS provide small capital to medium entrepreneurs for expansion their business. Security Deposit KDS received 10% Security against Loan.
b) KDS Field Operation:
Operations: -The organization has a three tier system at the field- Branch, Regions, Division; personnel associated with each tier are based at the Field.
Branch: A Branch in the field is the centre of all actions. The branch serves as a residence for field staff (FO/BM) and an office unit from where activities of branch originate and are managed. The Branch Managers supervise the activities of the FOs and also administer branch operation. BMs hold regular meetings with their FOs for efficient branch operation. As a part of their regular monitoring. Branch Manager visits the borrower’s house regularly.
Region: All the branches are distributed under 13 regions. Each region consists of 6-7 branches.Thirteen Regional Manager looks after all regions. The Regional Manager does not have any separate office and staff to conduct his/her work. The Regional Office is situated at the centre branch at a region. The Regional Manager regularly monitors the activities of a branch at least twice in a month.
Division: There are 3 divisions. Each division consists of 4-5 regions. The Divisional Manager (DM) looks after a division. As a part of his monitoring process, he visits 12 branches in a month. His monitoring contains varied facts viz. supervision of Regional Manager work, study of Branch growth, fund plan and utilization and the like.
Besides these there is one Operation Manager at the head for the smooth functioning of the field. Although Operation Manager is located at the head office, he plays a vital role in field operations. In fact, it is Mandatory for the Operation Manager to spend 2 weeks a month in the field. He is endowed with specific power and is capable of taking decision independently.
Internal Audit: KDS has a team of 8 people (inclusive of the Manager Internal Audit) working under the
internal audit section. Out of these 8 people, 2 of them are based at the head office and the rest 6 are based in the field each branch is audited every five six months.
The Manager Internal Audit coordinates and supervised the activates of the Internal Auditors (I.A.). The I.A.
submit their report to the Manager Internal Audit who is turn compiles/ consolidates the some and finally places it before the Chief Executive Directors. The Manager Internal Audit is directly accountable to the Chief Executive Director (CED). Once the CED goes through the report, the instructs the Implement Officer and the Operation Manager to take necessary steps it required.
Around 15-20 branches are audited each month is KDS in certain cases, the auditors may be given instructions to conduct follow up audits. Audit is also conducted in the Logistics Department at the head office once a year.
a) Microfinance Operation Structure:
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Program Associate
c) MFI Port-Folio Status Report:
For the month ended 30th July- 2010
No of branches 88 No of village covered 2,383 No of active groups 6,349
No of members 97,111
No of active borrower 72,742 Amount of lone
outstanding (in Rs.) 247,372,293 Cumulative no of lone
disburse 299,512
Cumulative amount of lone
disburse (in Rs.) 1,585,585,529 d) Methodology:
Credit Delivery Methodology:
Client/Borrower:
*1% women, mostly land less & asset less.
* SH. KDS follows ASA Modify Model.
* 100G – 10-20 Members in a group.
KDS developed and tested a sustainable credit model in West Bengal. The model is largely based on ASA, Bangladesh approach organizing the people of focused into groups, under the territory of particular branch of KDS. There are generally 10-20 members in a group, based in village. With an average number of 20 in each group. Each SHG members meets once in a week, at a fixed day, place and time. All the members are required to attend the weekly meeting and repay their installments. They are required to deposit their security and repay their loan installment.
The SHG members take all decision regarding the number of the loaner and amount of loan to be given to any borrower in that SHG meeting. KDS provides collateral free loans to its members, Group liability is absent from KDS's credit program. It is not the group but the individual who is held responsible for delinquency.
The Micro-credit services of KDS assist the group members to become economically self-sufficient Loan proposal are screened and approved by the SHG during their weekly meeting participation and group responsibility are the essential elements of the loan process.
After approval the loan proposal is submitted to the branch office through field staff. The loan disburses to the borrower in cash in the branch office.
The Micro-credit services of KDS assist the group members to become economically self-sufficient, Loan proposal are screened and approved by the SHG during their weekly meeting participation and group responsibility are the essential elements of the loan process.
After approval the loan proposal is submitted to the branch office through field staff. The loan disburses to the borrower in cash in the branch office. Members have to wait only 8 weeks after their registration to get the 1st
loan. The installment process is followed for repayment and the first installment is deposited with service charge is calculated flat on the principal of the loan. There is different size of small loan. It may be generally from Rs. 2000 to 15000/-.
The duration of this loan is one year and 46 equal installments cover its repayment.
e) KDS Microfinance Rules:
1) Rules of Loan:
*Loans disburse 8 weeks after formation of the SHG.
*90 % attendance in weekly meeting.
* 1st installment after 7 days in equal weekly installment.
* Last 3 installments can be repaid at a time.
* Loan sanction by the BM.
2) Group Formation Rule: KDS start with formation of SHG through identifying of target poor women eligible for membership through informal village survey, 10-25 poor women are formed a self-half Group and their age 18-55 years.
1. Each of the group has three group leader President, Secretary & Cashier are responsible for collection, security deposit and loan repayments during the group meeting.
2. The SHG model is largely based on ASA Bangladesh.
3. Each of the group organizes weekly meeting in a fixed day, place and time.
4. Every member is required to attend the meeting.
5. SHG member take all the decision in the meeting.
3) Credit Rule:
(i) Loan disburses 8 weeks after formation of the SHG.
(ii) 90% attendance in weekly meeting.
(iii) 1st installment after 7 days in equal weekly installment.
(iv) Last 3 installment can be repaid at a time.
(v) Loan sanction by the BM.
4) Products:1) KDS has 4 loan Products
Loan term –IGA (SHG) 46 weeks
Education loan 45 weeks
Festival loan(Term) 12 weeks
Repayment Charge Weekly
Processing fees 1.00 %
Insurance fees 1.50 %
Interest Rate 15 %
Education loan(Interest) 12.50 % 2) Insurance Product
1. KDS tie up with Life Insurance Company for Borrower insurance.
2. In case of untimely demise of Clients the successor of the expired Borrower will get the benefit of the Borrower insurance and the loan is exempted from repayment.
3. Health Insurance 4.Other Activities 5. Risk Fund
6.KDS receives 1%processing fees before loan disbursement. In case the Client’s husband expired in that case the client will get the benefit from the risk fund and the out standing loan is exempted from repayment.
Loan Classified-purpose wise%
Non farm enterprises loan - 52%
Transport --- 26%
Cottage Industry--- 10%
Animal Husbandry--- 6%
Agriculture ---6%
e) Business Process:
Loan Portfolio
Security Deposit Rs. 6, 2731415
Cumulative no of loan Disbursed 143505
Amount of Loan Disbursed Rs. 52,0000000 No. of Active Borrowers 84458
Amount of Loan Outstanding Rs. 24,0000000
Average Loan Size 2837
Borrower per Loan Officer 140
Loan Amount Per Loan Officer Rs. 457065
Repayment Rate Rs. 457065
f) KDS Area Operation:
SL
No. Name of the Districts Number Of Block Number Of Branches Number Of Members
1. NADIA 9 30 17313
2. HOOGLY 16 12 5577
3. NORTH 24 PARGANAS 19 33 36055
4. SOUTH 24 PARGANAS 12 6 4146
5. BURDWAN 4 6 3187
6. HOWRAH 3 1 346
7. MURSHIDABAD 8 1 1902
8. KOLKATA 4 1 540
9. MALDA 1 1 424
West Bengal
g) Operation Highlight
Past 5 Years Activities:h) KDS Lenders:
1. Axis Bank
2. United Bank of India
3. Friends of Women’s World Banking India (F.W.W.B.) 4. Small Industries Development Bank of India
5. West Bengal Backward Class Development Finance Corporation 6. West Bengal Minority Development Finance Corporation.
7. Rashtriya Mahila Kosh, (Department of Women and Child Development, govt. of India).
8. ICICI Bank.
i) “Success Story”
Geeta Paul
Geeta Paul is a landless woman belonging to O.B.C. community who lives in the hamlet of 24 pgs (N) in West Bengal with her husband, Mr. Haripada Paul is also landless labour working in his self profession Pottery.
Geeta and her husband lived on very heard life with their three children out of which two are school going.
Geeta Paul herself found out the S.H.G. and Duttapukur Branch office of K.D.S. in her won village. There she was inspired by field organizer of K.D.S. to enlarge her Pottery business. She became please and interested to provide more fund from K.D.S. to her business. So she got a loan of Rs. 7000/- (seven thousand) to develop her tools for the same. Both her husband and she herself did the same in order to enlarge their business and got the best profit. After 40 weeks, they got another loan of Rs. 8000 (Eight thousand) while they got more profit. As a result they are passing the life in a peace with their children and keep up the social culture properly.
She admires the K.D.S. for her development of business and her conjugal life.
Loan Cycle
Loan Amount
Monthly Income
1st 7000 1800
2nd 8000 3000 – 4000
3rd 9000 4000 – 4500
4th 12000 4500 - 75000
j) DIRECTOR’S Report
To the members of KDS Micro credit Services private limited your Directors have pleasure in presenting Second Annual Report of your Company together with the Audited Statement of Accounts for the financial year ended 31st March 2009.
Presently your company operates in one district in Kolkata in the state of West Bengal. The main activities of the company during the year were Micro Loans. The other relevant business parameters were as follows.
Sl.
1. Total No. of Member 547 599
2. Total No. Borrowers 450 324
3. Total amount of loan disbursed 5088000.00 2130000.00 4. Total No. amount of loan
outstanding
1645526.00 1750435.00
23. Success Factors of Micro-Finance in India:
Over the last ten years, successful experiences in providing finance to small entrepreneur and producers demonstrate that poor people, when given access to responsive and timely financial
services at market rates, repay their loans and use the proceeds to increase their income and assets.
This is not surprising since the only realistic alternative for them is to borrow from informal market at an interest much higher than market rates.
Community banks, NGOs and grass root savings and credit groups around the world have shown that these microenterprise loans can be profitable for borrowers and for the lenders, making microfinance one of the most effective poverty reducing strategies.
a. Problems for Alternative Micro-Finance Institutions
The main aim with which the alternative MFIs have come up is to bridge the increasing gap between the demand and supply. A vast majority of them set up as NGOs for getting access to funds as, the existing practices of mainstream financing institutions such as SIDBI and NABARD and even of the institutions specially funding alternatives, such RMK and FWWB, is to fund only NGOs, or NGO promoted SHGs. As a result, the largest incentive to enter such services remains through the nonprofit route. The alternative finance institutions also have not been fully successful in reaching the needy.
There are many reasons for this:
*Financial problems leading to setting up of inappropriate legal structures.
*Lack of commercial orientation.
*Lack of proper governance and accountability.
*Isolated and scattered.
24.
Future of Micro Finance :
Microfinance in India is in crisis because of the backlash against lenders in the southern state of Andhra Pradesh, the heart of the industry, where politicians have ordered borrowers not to repay their debts. The industry also faces an uncertain regulatory future with the state introducing new restrictions on lenders and Finance Minister Pranab Mukherjee saying last week he would formulate new rules to govern the industry once he receives a report from a committee of the Reserve Bank of India.
Indian microfinance is poised for continued growth and high valuation but faces pressing challenges and opportunities that—left unaddressed—could negatively impact the long-term future of the industry.
The industry needs to move past a single-minded focus on scale, expand the depth and breadth of products and services offered, and focus on the double bottom line and over indebtedness to effectively address the risks facing the industry.
Estimated that in next five years, 65% of the poor people will have excess to MFIs. Many Pvt. Banks and Foreign Banks would enter this business segment, because of very low NPAs.
Estimated that 5 % of the number of people below the poverty line will get reduced in the next 5 years.(World Bank report).
These agents contact several borrowers, thus expanding the reach of ICICI Bank at a low cost. Taking the FSC initiative further, ICICI Bank plans to provide farmers credit from sugar companies, seed companies, dairy companies, NGOs, micro-credit institutions and food processing industries.
SIG has been involved in a project in the southern state of Tamil Nadu to find out how wireless technology can be applied in the development of low cost models of banking. Another plan to increase the reach in rural areas is to launch mobile ATM services. ICICI Bank branded trucks have started carrying ATMs through a number of villages.
While these deaths are tragic, and the way that lenders are going about collecting payments is wrong, the root of the problem is not microfinance and not the interest rates. The problem lies in the way that MFI’s are going
While these deaths are tragic, and the way that lenders are going about collecting payments is wrong, the root of the problem is not microfinance and not the interest rates. The problem lies in the way that MFI’s are going