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[ MICRO FINANCE ] tenth of those charged by money lenders, and once they gained a reputation for regular repayment, they could get a bigger loan the next time around, and so on. Apart from loans they are provided life and health insurance that takes care of life’s calamities which push the poor back to poverty. In the process, the quality of their lives is constantly improving. This is how micro-finance has become one of the most effective interventions for economic empowerment of the poor. Goal in Place Ultimately the aim is to empower the poor and mainstream them into development. Of India’s population of 1.1 billion, 32% or 352 million live in urban & semi urban areas. Of this 352 m, 30% which is around 106 million constitute the poor. And this is Ujjivan’s target group, a fact which also accounts for Ujjivan’s spectacular success. There are a host of micro-finance institutions active in rural India, but not many for the urban poor. Ujjivan made a bold initial focus on the urban poor because “surveys and interactions with the urban poor reveals that they are exposed to a number of contingencies and are required to share their meager resources with neighbors, friends, relatives and colleagues. They live in the worst physical environment of our society even compared to the rural poor.” Ujjivan’s urban model was piloted in Bangalore over an 18-month period, from November 2005 to April 2007. By March 2008 Ujjivan had 38 branches in Bangalore, Delhi and Kolkata with a customer base of 68,033. Operations have also been launched in Mumbai and the plan is to reach 2 million customers nation-wide in the company’s 6th year of operation. The record as of 15 November, 2008, reads thus: No. of customers: 1,64,577 No. of borrowers: 1,44,930 No. of states: 8 No. of branches: 100 Amount of Loans disbursed: Rs. 1617.8 million Loan Repayment Rate: 99.5% Highs and Lows What delights the founder and CEO of Ujjivan is “the immediate impact of whatever we do. For example a loan given to a domestic help enables her to send her child to a ‘convent’ school; she knows that Elaine Ghosh at Ujjivan functions: The impact of their work is immediate the only way she can ensure that her child has a better future is by putting her through quality education. And she is happy to do it this way. She does not want charity; if she did she would be begging and not struggling valiantly through her hard life. She wants whatever is available to everyone else in our society at not an exorbitant price. Seeing her get ahead in life and looking at her joy gives us an immediate gratification.” The downside – and there is one, admits Sumit a little sadly – is that “however much you try, some of them will fail to make it, they are unable to get out of poverty. It is a very human situation; they never before had access to this kind of credit; suddenly there are 4 or 5 micro-credit institutions ready to give them money; they over-borrow and that puts them in a downward cycle.” Ujjivan officers counter this by providing financial literacy training and by avoiding giving credit to those who have already borrowed from multiple institutions. The need, therefore, is to share experiences and materials which will help the practitioners not only in understanding successes and failures but also provide knowledge and guidelines to strengthen and expand micro-finance programs. Only then can development take place. Birth of Parinaam Micro-finance has been in India for decades, and Andhra Pradesh can be considered its headquarters, because that is where the original impetus stemmed from. Research into the Micro-finance experience in Andhra has revealed that through the process only 50% are able to get out of poverty; 30% show no change; and 20% get worse because they use the credit for non productive things. The founders of Ujjivan too realized that unless they took a holistic approach towards the disadvantaged, they would only provide a partial solution to poverty alleviation. Out of this belief, Parinaam Foundation was envisioned as a ‘not for profit company’ with whom Ujjivan could partner to cover critical areas of initiatives outside the scope of microfinance. Parinaam was launched in March 2008, with an initial seed capital of Rs 56 THE INTERNATIONAL INDIAN
[ MICRO FINANCE ] Parinaam is a not-for-profit company registered under section 25 of the Companies Act. This means that all programmes are funded purely through donations and/or grants from sponsors. The only investors in the company are the Promoters/Founders (Elaine Marie as the main and one other - very senior retd director from the Tata Group of Companies – Mr. Sarosh Ghandy). Parinaam does not give any dividend on the investment, and all profits and funds will be channelled back into the organisation’s programs for the poor. Therefore, as Parinaam is a purely not-for-profit, it is permitted to apply for tax exemption under Section 12A and for the exemption under 80G (the ‘“... the truth of the matter is that borrowers of microfinance always pay back; women in particular.” Income Tax Act) to provide some tax relief to all donors and sponsors. Parinaam’s application for these two exemptions is under process at the Tax Dept at the present time. Anyone who wants to help with healthcare, education and other programs for Ujjivan’s poor customers will be welcomed with open arms! Please send queries to: Elaine Marie Ghosh, Executive Director, Parinaam Foundation, Website: www.parinaam.org, Email ID: emghosh@ujjivan.com, Cell: +91 98450 28680 Regarding Ujjivan, Samit says,“ We just completed our fourth round of capital infusion on November 14th, 2008. We will next raise capital after a year. People who want to get involved in our programs can do so through Parinaam.” 5,00,000 to provide ‘credit plus’ programs for Ujjivan customers: quality healthcare and education; practical vocational training and job enhancement; basic community services and capacity building initiatives for the Ujjivan customer, her family and her community. Financial Meltdown How have Ujjivan and Parinaam been affected by the financial crisis that has made the world weep? Elaine Marie answers this one: “Ujjivan is not a charitable organization, a foundation, or an NGO. It is a non-banking financial institution registered under the Companies Act. It was set up with people who invested their money; it is for profit; the profits go back to the investors, employees and customers. Investors are in it because they want to help the poor, but they do not want to give donations. While the rest of the world is going broke, the shares of micro-finance companies are being sought after because they are valued higher.” Samit affirms this as he says, “We signed the documents for our fourth round of Capital increase on November 14, 2008. Due to over subscription, we raised Rs. 94 Crores instead of the original plan of Rs. 75 Crores. This is after less than three full years of operation. Also, for the first time in the micro-finance industry in India, we organized secondary sales of our individual investors. The few of our initial investors, who opted for this, were able to register incredible capital gains. Quite a story considering today’s environment. We have less than fifty investors of whom four are from Dubai.”The problem if any is that they have depended on the banks for loans which they on-lend it to the customer. Now, the banks have reduced extending credit, the flow has slowed down, the interest has been raised by at least 2 to 5 % and as Samit points out, “This increase cannot be passed on to our poor customers, we cannot raise our rates, so it impacts our profitability.” It is however not a large problem since the amount of investment has increased so dramatically. And the truth of the matter is that borrowers of micro-finance always pay back; women in particular. “We have a 99.5% repayment record,” says Samit with pride. Where Parinaam is concerned, it remains unaffected by the global crisis because, as Elaine Marie points out, “The reality is that one way or another, we cannot do without our maids, vegetable vendors, grocers and all those who make our lives comfortable Those who can afford maids will continue to afford them; meltdown or not, you will still go to buy your vegetables and pick up your rice and dal. So the jobs of the poor are not affected and they face no crisis. That’s what makes micro-finance companies so attractive to investors.” Sacrifice is the Bottom line The irony is that rarely is there great professional success without a large dose of personal sacrifice. Samit says with a laugh: “Elaine complains that our social life is nil. Frankly, when I stepped into it, I had not expected it to be the 24X7 involvement it has turned out to be.” Elaine elaborates: “He leaves at 7.30 in the morning, returns at 7.30 in the evening and goes straight to his computer. As a couple, we have lost touch with one another. I could be ill, or the children could be having some problems, but he has had to let go of those kinds of concerns. I cannot talk to him about the cook or the maid or the things couples normally interact about. Our conversation is only about work. I feel sad that we have lost our personal relationship and am honest enough to admit it. But in 2004, when we walked through the door, we both knew that we were no longer husband and wife, but that we had become colleagues. What I had not anticipated was that we would remain colleagues even after coming out of the door at the end of the day.” However, both Samit and Elaine consider it a “small price to pay” when they look at the lives that are being transformed by Ujjivan and Parinaam. Ingrid Albuquerque is the Content Editor and Website Manager of the Haggai Institute’s international website; and the Managing Director of Berean Bay Media House. She has edited many magazines and is the author of a few best-selling books. THE INTERNATIONAL INDIAN 57
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