Social Impact Assessment of Microfinance Programmes - weman

Other filters related to the specific product also apply. For instance, if an application is
made for purchasing raw material for handicrafts, it will fall under the Handicraft loan
which has a maximum ceiling of Rs. 4,000. Similarly, in the first round of application,
the maximum amount given is Rs. 10,000. The selection of applicants for consequent
rounds depends on the credit repayment history of the individual as well as the credibility
of group or credit guarantors for social collateral. Also, those applications are not
considered where units or groups have already taken credit from some other MFIs or
banks. A vigilant and thorough screening process is thus put in place. Annual planning
and organizational directions of SAFWCO also play an important role in deciding the
client numbers and types of loans to be processed. SAFWCO’s management feels that a
ceiling quota for each district should be calculated in relation to overall operations and
programmes for each district. Such targets also help the organization in estimating cost
recovery for branch office operations.
6.1.6 Portfolio Performance and Loan Recovery Ratios
SAFWCO charges an 18 percent service charge on a flat basis, which is its main source
for meeting its operational expenses. Keeping true to its principles, SAFWCO has made
several efforts to facilitate its clients in payment. For instance, the services charges are
reduced up to 4.5 percent if the loan is paid off in 3 months. In addition, a nominal fee of
Rs. 100 is charged for initial documentation. Many a times, this includes facilitation for
computerized NIC formation for almost 80 percent of women clients, especially in rural
areas.
SAFWCO has a PAR>30 days of 3.1 percent and annual write-off ratio of 1.5 percent,
which indicates a need for SAFWCO to address this issue. While the PAR>30 days has
been reduced from 4.33 percent in 2004, it is still critical for SAFWCO to improve its
credit risk profile either through improvement in its loan tracking system or by improving
the appraisal system. According to SAFWCO, it averages 95 percent for men and 99
percent for women, whereas rural area recovery is 100 percent while that for urban areas
ranges between 70-80 percent.
They have recently designed an elaborate MIS which is planned to become functional by
February 2007 and will greatly assist in the tracking and recovery processes. Moreover,
with is five-year strategic planning conducted in December 2006, it is expected that
performance and financial sustainability will be improved while reducing the operational
costs. Although the Yield of Portfolio is fairly strong with 24 percent average, SAFWCO
spends a large amount in its social mobilization strategy in rural areas.
6.1.7 Client Loyalty and Drop Outs
The average retention rate is 60 percent with variations across districts and communities.
It is maintained that clients give preference to SAFWCO’s Credit and Enterprise services
over other MFIs and banks in the area, namely NRSP and Khushhali Bank. Partly, this is
the outcome of the integrated and grass-roots accessibility approach that is promoted by
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