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SIDBI Foundation for Micro Credit (SFMC) SFMC, set up with assistance from IFAD and DFID (see Chapter 8B), started operations in January 1999. Apart from providing loans grants and equity to MFIs, SFMC's mission includes a strong capacity building component (discussed in Chapter 6), the development of a network of service providers, advocacy of appropriate policies and regulations, and promoting the exchange of information across the sector. 3 Partner institutions comprise large and medium scale MFIs with an anticipated minimum borrowing requirement of Rs 1 million a year, and an outreach of at least 3,000 poor members (or the prospect of reaching this scale within a year), and a clear and credible path to operational and financial self-sufficiency. Apart from providing loans grants and equity to MFIs, SFMC's mission includes a strong capacity building component (discussed in Chapter 6), the development of a network of service providers, advocacy of appropriate policies and regulations, and promoting the exchange of information across the sector Prospective partners are first rated by an independent rating agency. In order to encourage new NBFCs to enter the field, the usual requirement of a minimum track record of three years can be relaxed if the partner has been rated AA (or the equivalent). Grant support is provided as technical assistance to strengthen systems, and also as operational support to enable MFIs to meet a part of their operational deficits during the initial, expansion phase. The Transformation Loan is a quasi-equity product providing for conversion into equity after a specified period of time, subject to the MFI attaining certain structural, operational and financial benchmarks. In 2005-06 SFMC disbursed Rs 253 crores of term loans to 62 partners, Rs 4 crores of Transformation Loans to five partners, sanctioned Rs 9 crores as capacity building grants, and made one equity investment of Rs 1 crore. 4 The Rashtriya Gramin Vikas Nidhi (RGVN) RGVN, headquartered in Guwahati, was set up in the mid-1990s by a consortium of public financial institutions to wholesale to small start-up NGOs in the Northeast and East, much as RMK does for the whole country. As a bulk lender through its NGO Support Programme, RGVN followed a policy until recently of not assisting its partners with revolving fund loan assistance more than twice (apart from providing capacity building assistance and a modicum of grant funding) but seeking instead to graduate them to other lenders. Thus it lent an average of only 2 lakh to about 100 partners in 2004-05. However it has now decided to lend larger amounts to about 10 to 20 out of its 400 partners who have been judged on the basis of a grading exercise to have built-up enough capacity to absorb loans of about Rs 5 lakh each initially. Since the bulk of its funds come from borrowings (from SIDBI, ICICI, and others) it has to charge a higher interest rate than RMK (12 as against 8 percent) and for this reason some of its fledgling partners could also be picked up by RMK, which has appointed two nodal agencies (see below) in Assam. RGVN started a retail programme only for Assam, the Credit and Savings Programme, more recently, which has grown rapidly to equal if not exceed the bulk lending programme in size. 5 Friends of Women's World Banking (FWWB) FWWB, India, is part of the SEWA family of institutions and one of about 40 global affiliates of WWB, New York. It is headquartered in Ahmedabad, and has an office in Chennai. It continues to remain a registered society. It has received grants and loans from a number of funding partners, and its business model is to leverage its corpus by borrowing from the banks and onlending to its MFI partners. Its largest lender in March 2006 was SIDBI (with 36 percent of total borrowings outstanding), so in a sense FWWB is a "Tier 2" apex or wholesaler. 136
Apex Financing Institutions: Growing the Seeds and Saplings Table 8.2 Financial performance of FWWB and RMK (Rs crores) FWWB RMK March 2005 March 2006 March 2004 March 2005 Number of states 11 12 20 20 Number of partners (cumulative) 272 292 1113 1153 Number of partners (active) 79 79 NA NA Number of partners assisted 57 70 112 118 Loans outstanding to partners 58.3 67.0 27.6 36.5 Disbursements 61.5 70.6 14.5 18.9 Disbursement per partner assisted 1.1 1.0 0.13 0.16 Number of borrowers (active, current) 1.86 lakhs 2.17 lakhs NA NA Average loans size of borrowers Rs 4974 Rs 5008 NA About Rs 3000 Corpus 9.6 10.6 54.1 54.1 Reserves and surpluses 5.6 8.6 19.1 21.7 Share of southern states in LO/disbursements* 81 percent 75 percent 56 percent 52 percent Cash and bank balances 20.5 20.8 37.00 33.00 PAR of partners, percent 2 0.4 NA NA Interest from loans to partners 8.1 9.3 1.61 1.96 Income from bank balances 0.55 0.66 1.95 2.81 Sources: Annual Reports and interviews. NA= not available, *LO for FWWB and disbursements for RMK. Figures are for the last two years for which published annual reports are available from each organization. FWWB sees its core role as institutional development (ID) and the availability of grant funding, especially from USAID for this purpose, enables it to play a strong capacity building role through a system of a minimum of two technical assistance visits a year by its own staff. These entail face-to-face interactions at both the management and operations level to establish strong systems in respect of accounting, financial management, governance and MIS. FWWB feels that it has an advantage of being able to provide TCB assistance more effectively than TCB providers who provide it as a stand-alone input. Partners are graded into three categories in terms of outreach and loan portfolio into Big Partners (of which there were 6 in March 2006), Institutional Development Partners (20) who are in turn graded into A, B, and C FWWB sees its core role as institutional development and the availability of grant funding, especially from USAID for this purpose, enables it to play a strong capacity building role 137
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Microfinance in India A State of th
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List of Tables Page No Table 2.1 Gr
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Preface and Acknowledgements This r
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Abbreviations ABC ADB BC BF CAR CAG
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CHAPTER 1 Overview and Summary of M
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Overview and Summary of Main Recomm
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1 1a 1b 2 2a 2b 2c 3 3a 3b 3c 4 4a
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The Light and Shades Study A major
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highest proportion of weak records
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their profitability after accountin
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allow the programme to grow organic
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1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8
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Endnotes 1 It is very hard to compa
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as cash with the groups, the true r
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linkages", 11 percent 3rd, and 5 pe
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References APMAS (AP Mahila Abhivru
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CHAPTER 3 Progress Under the MFI Mo
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Progress Under the MFI Model is fun
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Table 3.4 Comparative performance i
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Progress Under the MFI Model on lit
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Progress Under the MFI Model 4 Howe
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Progress Under the MFI Model Refere
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MFIs, and the need for MFIs to plou
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size had actually come down during
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The point at which peer group press
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The lack of contact and communicati
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Box 4.1 Continued 4. MFIs will coll
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Endnotes 1 There will be many disag
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19 The base suicide rate in AP is 1
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References APMAS, 2005, "A Report o
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(such as cattle and houses), and co
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The advantage of the provider model
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Some lessons learnt from experience
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Box 5.2 VimoSEWA: Synergies between
Page 88 and 89: 86 Table 5.1 Main Feature of Health
Page 90 and 91: Endnotes 1 While the microinsurance
Page 92 and 93: 16 A little less than a fifth of th
Page 94 and 95: 29 The rationale for transfer progr
Page 96 and 97: Roth, James and Vijay Athreye, 2005
Page 98 and 99: Issues and priorities for action re
Page 100 and 101: Endnotes 1 See for instance CGAP (2
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Page 104 and 105: such as Chaitanya who soon became s
Page 106 and 107: money to support operational expens
Page 108 and 109: finance, and the microfinancial ski
Page 110 and 111: Box 6.1 Continued in experts and to
Page 112 and 113: Endnotes 1 In a sense it always was
Page 114 and 115: 16 Examples are Margdarshak in Luck
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Page 118 and 119: Table 7:1 Commercial bank exposure
Page 120 and 121: The main constraints to the expansi
Page 122 and 123: further review, RBI has modified th
Page 124 and 125: 9 Thus ICICI has sold some of its b
Page 126 and 127: B. Equity Investments by the Ventur
Page 128 and 129: Figure : The Bellwether triangle Lo
Page 130 and 131: Despite the weaknesses the public s
Page 132 and 133: Box 7.1 Continued foreign sources o
Page 134 and 135: Endnotes 1 At this point they will
Page 136 and 137: References ACCION, 2003, "The Servi
Page 140 and 141: categories, depending on the amount
Page 142 and 143: The distribution of total disbursem
Page 144 and 145: Endnotes 1 It should be noted that
Page 146 and 147: B. Donor Participation in Indian Mi
Page 148 and 149: this has dropped to 8% on the curre
Page 150 and 151: and poor populations. More directly
Page 152 and 153: and expansion of available retailer
Page 154 and 155: 11 SDC through various programs for
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Page 158 and 159: 1.1 Impact evaluation of Spandana's
Page 160 and 161: in the loan tenure of 24 months. Th
Page 162 and 163: There are two main motivations of a
Page 164 and 165: compensation structures used by Ind
Page 166 and 167: Endnotes 1 By Annie Duflo, Anvesha
Page 168 and 169: 29 The main components of direct tr
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