SPANDANA ± Innovative Financial Solutions for the Poor

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AGENDA

Global Microfinance Industry Micro-Finance India Story

Spandana Story

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GLOBAL MICROFINANCE INDUSTRY
Global MFI Industry Issues in the Global Microfinance Arena ± Rapid development in some regions seeing some overindebtedness ± Asian MFIs see corporate governance, technology and staffing as key issues ± Specifically in India, political interference is seen as a major concern

± 25% annual CAGR ± Asset Under Management$32 Billion Dollars

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AGENDA

Global Microfinance Industry Micro-Finance India Story

Spandana Story

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INDIAN MICROFINANCE INDUSTRY
‡ More than ~ 135Mn households in India not yet serviced by financial players

Industry Overview

‡ Potential credit demand of ~ INR 1,650 Bn (30K per poor household) ‡ Large players will continue to grow at a fast pace ‡ Indian market is the largest microfinance market in the world ‡ Indian Microfinance in a 2 Decade Story

Current Microcredit Opportunity in India Rs Bn

Potential i ro redit Demand C rrent i ro redit Disb rsement

1,650* 2,314^ 255

Potential Credit Demand estimated in the range of INR 1,650 Bn (USD 37 Bn) to INR 2,314 Bn (USD 51 Bn)

Statistics

‡ Estimated to cover only about 10% of poor ‡ 7 Indian MFIs in the Global Forbes top 50 MFI ‡ Most efficient in terms of operating costs ‡ Estimated requirements are over $50 billion
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INDIAN MICROFINANCE INDUSTRY
‡ Dominated y the NBFC model ‡ Top MFIs in terms of mem er size and portfolio size are all NBFC ‡ SHG under Govt. patronage is a significant player Recent Trend ‡ Grameen - Hy rid models increasingly relevant ‡ Lending is at a out 12 ± 15% pa flat ‡ Far cheaper than moneylenders and even credit cards ‡ Costlier than the average rates paid y
MFI Growth ± Borrowers and Outstanding Loan Portfolio
75 69.1
14.2 50 37.1 8

16 12

25 11.4 3.6 0 1.0 2.3

22.3 4.9

7.9 4

0

2004 2005 Loan Portfolio ( Rs Bn) (LHS)

2006

2007 2008 Number of Borrowers (MM) (RHS)
Source
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Inverting the pyramid,

2008, Intellecap

INDIAN MICROFINANCE INDUSTRY

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AGENDA

Global Microfinance Industry Micro-Finance India Story

Spandana Story

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SPANDANA STORY
PROFITABILITY INCORPORATION
Highest in the Industry

1998

OPERATION COST
Lowest in the Industry

Global Ranking
6th Largest ± Outreach 07

Indian Ranking
Second Largest

ROE/ROA
Highest in the Industry

CRISIL Rating
Highest : A-/Stable

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Key Mile Stone
1998 Outreach AP ± 1 State 2005 Karnataka ± 2 States 2006 Tamil Nadu ± 3 States 2007 2008 2009
Oct 2009

Orissa, Rajasthan Jharkhand MH, and MP ± & Goa ± Chhattisgar 8 States 10 States h ± 6 States First Round PE ± JM Financial and LOK Capital Second Round Equity Infusion ± Valiant Capital Partners 21 Crores 94 Crores

Gujarat ± 11 States Third Round of Equity ± Tamaseak Holding (Under Process)

PE Infusion

PAT AUM 289 Crores
Post Conversion to NBFC 2 Yr CAGR in Loan 9 Book: 28%

2.6 Crores 391 Crores

731 Crores 1868 Crores
Post External Equity Funding 2 Yr CAGR in Loan Book: 117%

2431 Crores

Registered as a Society

SPANDANA Growth Story Financial
4000 3566

3000

2000 1274 1000 325 0 FY05 FY06 FY07 Total Income PAT FY08 FY09 141 831 608 129 271 26 903

4 Yr PAT CAGR (05-09) :

59%

4 Yr Revenue CAGR (05-09) :

82%

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SPANDANA Growth Story Operation

Operational Highlights Presence in States

Octo er 2009 10

March 2009 8

March 2008 8

March 2007 6

No. of Branches

1,188

944

435

295

No. of Clients (000)

3,384

2,543

1,240

916

Loan O/s. (Rs Cr.)

2,432

1,868

731

425

Total Staff

8,405

6,373

3,024

1911

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SPANDANA Growth Story Operation
18,683

7,313 2,892 2,388
386
722 916

2,432

3,916
1,189

FY05

FY06

FY07

FY08

FY09

Gross Loans Outstanding (Rs MM)

SPANDANA
Rajasthan Chhattisgarh

Reach
Jharkhan d

Madhya Pradesh Orissa

Maharashtra Andhra Pradesh

Karnataka Goa

Tamil Nadu

OUTREACH - SSFL
TOTAL STATE NUMBER OF VILLAGES NUMBER OF DISTRICTS NUMBER OF CLIENTS : 10 STATES : 55,382 : 167 : 3,384,531

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SPANDANA SOCIAL Initiatives

FLOOD RELIEF  Basic amenities to the est of our a ilities to flood affected victims SCHOLARSHIPS  Monetary support to students to complete higher education SAFE DRINKING WATER  Tie up with HUL to supply water purifiers in rural areas ALTERNATE SOURCES OF ENERGY  Tie up with Intelizon to supply solar lanterns

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SPANDANA Departments
HR Management Administration Treasury IT MIS Training Field Operation

External Finance

Accounts

Corporate Communication Audit

New Business Initiatives Corporate Affairs ( Legal)

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Key Milestone of SSFL
Operational Highlights August 2009 March 2009 March 2008 Presence in States No. of Branches No. of Centers No. of Groups Active Borrowers (000) Loan O/s. (Rs Cr.) Total Staff Total Credit Assistants 112,377 363,326 3,005 2,388 7,981 5,648 10 1,150 90,221 265,650 2,432 1,868 6,373 4,556 8 944 47, 93 125,883 1,189 731 3,024 2,223 8 435

Introduction 
Spandana was founded in 1997 by Ms Padmaja Reddy. A chance encounter with a rag picker prompted Ms Reddy to start microfinance in the urban slums of Guntur. Since then Spandana¶s microfinance programme has grown tremendously and the organisation is now one of the largest and most rapidly growing MFIs in India. Spandana is one of the most efficiently run MFIs in the world. 

Spandana has achieved this remarkable distinction in a short span of just under a decade since its inception in 1998. This has been possible on account of its highly focused and clearly structured operations.Spandana has continued to successfully manage growth with operations now spanning 8 States Andhra Pradesh, Karnataka, Tamil Nadu, Orissa, Maharashtra, Chhattisgarh, Madhyapr adesh and Rajasthan. It now boasts of a client base that constitutes almost 1.5% of the BPL (Below Poverty Line) population of India.

BOARD OF DIRECTORS

Mission 
To be the leading service provider, creating market driven & equitable solutions for segments not optimally served.  This will be achieved through a culture of client focus, innovation, efficiency, transparency and excellence for the benefit of all stakeholders.

VISION 
We endeavour to serve our clients by addressing their complete credit needs so as to bring in significant impact in their living standards. Besides financial intermediation, we would be focusing on sub sector intervention such as dairy development since about 90% of our rural clients have invested their loan amounts on this activity. We retain our core values of professional rigor, efficacy and excellence and remain a client responsive organisation by being humble and receptive to their needs.

PRODUCTS 
General Loans Meant for daily wage women labourers and petty traders for Income generation and consumption purpose with a loan size of between Rs. 2,000 and Rs. 20,000  Small Business Loan Meant for small business people with daily cash flow with a loan size of between Rs. 4,000 and Rs. 20,000  Micro Enterprise LoanMeant for SMEs and salaried people with a loan size of between Rs. 25,000 and Rs. 200,000

PRODUCTS 
Agri Family LoanMeant for small and marginal farmers with a loan size of between Rs. 5,000 and Rs. 30,000  Dairy LoanMeant for milk collection agents and milk producers with a loan size of between Rs. 10,000 and Rs. 100,000  Farm Equipment LoanMeant mainly to cater to the needs of Small and Marginal Farmers with a loan size between Rs.50,000 and Rs.350,000

AREA OF OPERATIONS

PROJECTS

Educational and recreational programs for School dropouts 
Objective: Facilitate programmes aimed at procuring rights of children with a special focus on health, education, recreation and protection  Achievements:  More than 500 children out of school have been helped to attened fomal Schools.  5 working children have been rescued from child labour and are being provided with long term support for education 

More than 500 child labourers & Street Children are being helped to go school through our Residential and Non-Residential bridge campus.  More than 500 children going to school have been helped to get through exams with remedical education support offered by Spandana.  Future Direction: Reach out to more than 10,000 children over a period of 5 years with support in the areas of Education, Recreation, Health, Shelter, Food & Clothing through community based intervention and institutional services as situation demands.

Awareness Generation Activities 
Objective: Educate masses on issues related to health, legal, environmental and social aspects of human life in order to create an enabling atmosphere for individuals.  Achievements: 1500 people from 20 communities were reached out with the message on HIV / AIDS, Cancer and Tuberculosis. The extension outreach wing has identified 50 positive cases under HIV and carrying out referral services in collaboration with various organisations. 

Future Directions:  To organize workshops and camps on health and legal issues for focused groups.  To start vermin compost and paper recycling units.  To intensify Legal Awareness progammes. in the community.

Self Help Programs for Women 
Objective: Create opportunities to marginalized women to identify suitable vocations, impart trainings and establish micro enterprise units through thrift and credit programme.  Achievements:  100 Women from 12 Self Help Groups were helped to receive revolving fund to the tune of Rs.1,25,00/from various government run schemes to start income generation units.  500 women are part of the self help programme promoted by Spandana. 

Future Directions:  Aiming to form a Mutually aided co-operative thrift society which would be mutually beneficial to women in establishing micro enterprise units and income generation programmes for more needy families living in poverty.  Identify and establish more IGP units for needy women.  Enroll more number of women in the thrift credit programme for larger benefit.

Programs for Young People 
Objective: Facilitate programmes aimed at empowerment through business / income generation / skill up-gradation, awareness and recreation for youth.  Achievement: Started in the year 2005, the Career Counseling and Job Placement desk for youth has given opportunities for 40 young men and women to take up suitable vocation and successfully placed in jobs in corporate offices with a salary between Rs.2,000/- to Rs.6,000/- per month. 

Future Directions: To impart skill development programmes for young girls who are economically weak. Start micro enterprise units in their neighborhood so as to realise their financial needs and help them market their products. Imparting life skills.

Peace Initiative Programs 
Objective: Promote peace, harmony and social justice through programmes aimed at sensitisation and awareness.  Achievement: The peace and conflict resolution project has created better relationships among people living in communities manifested with religion based conflict. The project covers most sensitive slums in urban southern Hyderabad city of Andhra Pradesh.  Future Directions: To expand these activities and link them up with micro finance and formation of youth clubs

Entrepreneurship Training and Development 

250 young girls and women have undergone capacity building programmes for skill enhancement in Embroidery, beautician course, food processing and hand embroidery work apart from gaining knowledge on business and marketing skills.

Service to the Senior Citizens 
Services to the Senior Citizens:  5 Senior Citizens who have been deserted by their families have been helped with food, shelter and clothing at our senior citizen's home.  Future Directions:  To expand activities for care and support to women, young girls and children in distress in terms of rescue operations in collaboration with organisations working for women and children¶s rights.  To reach out to the senior citizens in need through emotional care and counseling, health, food and shelter in a larger way.  Start a job placement help line for women in need of jobs with a motive to provide them with safe and secure work place.

Loan Products
1. General Loan > Group based lending > 5 to 10 women are formed into joint liability groups > Loan is for income generation and debt relief > Weekly repayment > Tenure: 50 weeks (for loans above Rs.10,000- 60 to 75 weeks op-tion is given) > Loan Size: Rs.2,000 to 15,000 > Clients: Daily wage laborers both skilled and unskilled and only women > Interest Rate: 15% diminishing and 2.5% upfront fees

2. Small Business Loan > Group based and individual lending (80% group and 20% indi-vidual lending) > 5 to 10 women or men having small business are formed into joint liability groups > Loan is for business expansion and working capital > Daily repayment other than Sunday > Loan Size: Rs.2,000 to 20,000 > Tenure: 100 days or 200 days or 300 days > Clients: Small business people with daily cash flow both men and women > Interest rate: 14% flat with no fees

3. Micro Enterprise Loan > Individual Lending > Guarantee: PDCs and Co Obligant guarantee > Should have a sizeable business/ salary/ rental income > Monthly Repayment > Loan Size: Rs.25,000 to Rs.200,000 > Clients: SME owners, Salaried Employees etc both men and women > Interest Rate: 18% diminishing and 2% upfront fees

4. Agri Family Loan > Group based lending > 4 to 6 small and marginal farmers are formed into joint liability groups [both men and women] > Loan is for agriculture and allied activities; > Flexible repayment. Interest payable monthly > Tenure: One year > Loan Size: Rs.5,000 to 30,000> Clients: small and marginal farmers with land holding of 1 to 10 acres [both men and women] > Interest rate: 15% diminishing and 2% upfront fees

5. Dairy Loan > Loan is given to Milk Collection Agents and Milk Producers both men and women > Individual Lending: > Guarantee: The Dairy Owner who buys milk > Loan tenor: 1 year > Loan repayment frequency: once in fifteen days > Loan Size: Rs.10,000 to 1,00,000> Interest Rate: 12% diminishing

Thank You!