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SKS Microfinance Ltd offers a range of products and services, which have been developed based on the financial needs of working of poor women. We classify our offerings into proprietary and distributor products.

 

Product

Features

Benefits

Income Generation Loans (IGL) - Aarambh

Loans range from Rs. 2,000 to Rs. 12,000 for the first loan; subsequent loan amounts determined by past credit history and increased each in set increments up to a maximum of Rs. 30,000

Provides self-employed women financial assistance to support their business enterprises, such as raising livestock, running local retail shops called kirana stores, providing tailoring and other assorted trades and services

Term of the loan is 50 weeks with principal and interest payments due on a weekly basis

12.5% - 15.0% flat interest rate/26.7% - 31.4% annual effective interest rate, including upfront interest of 1%

Mid-Term Loan (MTL) - Vriddhi

Loan amounts range from Rs. 2,000 to Rs. 15,000 in each annual cycle.

Provides self-employed women financial assistance to support their business enterprises, such as raising livestock, running local retail shops

 

Available any time after the completion of 20 weeks & before 40 weeks of an IGL cycle

called kirana stores, providing tailoring and other assorted trades and services

Term of the loan is 50 weeks with principal and interest payments due on a weekly basis

12.5% - 15.0% flat interest rate/26.7%-31.4% annual effective interest rate, including upfront interest of 1%

Emergency

Interest free emergency loans

 

Loans and

range from Rs. 500 to Rs. 2,000

Designed to meet the unforeseen

Advances -

emergency requirements of members

Raksha

Term of the loan is 20 weeks with a bullet repayment

Disbursed within 24 hours of request

Interest free funeral advances of Rs. 1,000 adjusted out of the claim settlement of loan cover insurance

Funeral advance paid to a member’s family upon the death of the member or her spouse

Life Insurance

Interest free loans of Rs. 500

Issued to members to pay their life

Loans

insurance premiums during the

Term of 25 weeks with principal repaid weekly

initial 25 week period

Helps to promote habit of savings and reduction of vulnerability among members

Mobile Loans

Financing of mobile phones and telephone services

Provides financing for mobile phones and telephone services to our

Maximum loan amount of Rs.

members

2,000

12.5% - 15% flat interest rate/30.6% - 36.2% annual effective interest rate

Term of 25 weeks with principal and interest repaid weekly

Sangam Store

Working capital loans ranging

Provides a working capital loan to

Loans

from Rs. 5,000 to Rs. 25,000

fund the needs of our members who own and operate kirana stores

Interest free

Term of the loan is 14 days

The program allows these members to purchase their inventory of consumer goods and groceries from a national wholesaler at wholesale prices

Housing Loans

Loans range from Rs. 50,000 to Rs. 150,000

Provides financial access to women for construction of new houses or

Members must have completed at least 3 IGL cycles to qualify or one ILP to be completed

improvement & extension of existing houses

Term of loan is 3 to 5 years with principal and interest payments due on a monthly basis

11.9% flat interest rate, 21% annual effective interest rate

In addition, loan processing fee of 2% collected upfront

Per RBI circular DNBS. 204/CGM (ASR)-2009 dated January 2, 2009, SKS’s Board of Directors has discussed and formally adopted an interest model based on cost of funds, operational costs, and risks involved for each product.

he Sangam Stores project is aimed at providing working capital finance to SKS members who own small ‘kirana’ stores. With credit supplied by SKS, shopkeepers can buy consumer goods and groceries through a dedicated third-party vendor. This relationship gives access to quality products at competitive prices that are delivered straight to their shops. Our members save time and transport costs normally spent on buying goods from local markets. SKS is partnering with Metro, the German wholesaler, which supplies member kiranas from a special inventory of 250 SKUs. Under this project, SKS generates and aggregates demand from kirana store owners, in addition to supplying credit to them. This pilot is the first step towards creating a vibrant distribution network across sections of society currently not serviced by manufacturers.

Loans from Rs. 5,000 to Rs. 25,000 fund the needs of our members who own and
Many SKS members have asked for larger loans to make improvements on their homes or build

Many SKS members have asked for larger loans to make improvements on their homes or build new ones. SKS has launched a housing loan pilot for members who have been with SKS for a minimum of three years. Members can repair their houses, such as changing a thatched or asbestos roof to RCC, or make improvements such as building a latrine or adding an extra room. The loan has a repayment period of three to five years as per the repayment capacity of the members. SKS is currently carrying out a pilot programme in rural markets with support from HDFC and hopes to roll out housing loans more widely in the next financial year.

Many SKS members have asked for larger loans to make improvements on their homes or build
Many SKS members have asked for larger loans to make improvements on their homes or build

SKS has partnered with Hindustan Unilever to provide Pureit water filter devices to our members. SKS provides the loan to make the water filter affordable and HUL provides the distribution, installation, and servicing that ensures our members have access to clean water. SKS is currently assessing the learning from our pilot branches and will determine a rollout plan to reach our members pan-India in the coming months.

Many SKS members have asked for larger loans to make improvements on their homes or build
Many SKS members have asked for larger loans to make improvements on their homes or build

Most of our members live in areas that have erratic power supply forcing business and normal lifestyle to come to a halt with sunset. Solar-powered lighting gives our members the opportunity to be independent from unreliable, low- voltage electricity grids or to light their homes if theirs are currently u

SKS has identified the barriers to scaling microfinance – what it calls the 3 Cs of Capital, Capacity and Costs – and has taken an innovative approach to overcome these barriers. These three principles, using a profit-oriented model, drawing on best practices from the business world for scaling and using technology have helped us create a new generation of microfinance institution and enabled us to reach numbers that otherwise the microfinance sector has not seen before.

Many SKS members have asked for larger loans to make improvements on their homes or build

Many believe that microfinance should be a “social business”, meaning investors should

get their investment back but no profits. SKS has a different view. If the microfinance industry is going to provide the estimated INR 2,399.35 billion (USD 51.4 billion) of credit needed by the poor, it must tap commercial capital markets – and that means structuring microfinance so that investors can expect a return on their investment. That is why SKS converted from a non-profit NGO to a –profit Non-Banking Financial Company (NBFC) – regulated by the Reserve Bank of India – in 2005.

get their investment back but no profits. SKS has a different view. If the microfinance industry

With rapid scaling comes the challenge of building organisational capacity. Rather than look at conventional microfinance models, SKS based its business strategy on principles borrowed from fast-scaling consumer businesses. SKS standardised its products and front-line processes and adopted factory-style training models that have helped corporate giants scale up rapidly – thereby boosting our own workforce capabilities and growth.

get their investment back but no profits. SKS has a different view. If the microfinance industry

SKS Microfinance firmly believes that technology is one of the key enablers for scaling microfinance. For SKS, technology is an investment that is adding value to what and how we offer financial solutions to our members. SKS Microfinance is among the first to develop and deploy an industry standard MF technology platform in-house, delivering superior value to our end customers. The systems designed and deployed at SKS have enabled the business to grow rapidly since its simple to use, saves time, is accurate and allows for data highlights to be transferred to head office when needed. SKS is now investing in putting up a robust IT backbone with a world class data backup centre delivering mission critical services and connectivity across our branch offices to manage the next phase of growth. The new agile and scalable technology architecture is capable of handling the challenges specific to the microfinance sector. A web-based Business Intelligence portal using state-of-art technology and a highly flexible and scalable platform has also been deployed

We believe that the most important way to improve the lives of the poor is through economic development. It is the foundation on which other human development - such as education and health - can be built. At SKS we are proud of improving the lives of more than 6 Million members through microfinance, which in turn fosters economic development. Each member is able to use microfinance to make a better life for herself and her family. Microfinance enables people to earn income and build assets, which means families eat better, they can afford health care, and children are more likely to attend school.

Within the microfinance sector, SKS has been able to distinguish itself through its performance. We have successfully applied methods from the business world, such as the use of standardisation and automation, to build an organisation that leads the microfinance industry in a number of areas, including rapid growth, high quality service to our members, streamlined

delivery, transparency and innovative products.

delivery, transparency and innovative products. Operational Information FY10 FY09 FY08 FY07 Total no. of Branches 2,029

Operational Information

FY10

FY09

FY08

FY07

Total no. of Branches

2,029

1,353

770

276

Total no. of Districts

341

307

219

103

Total no. of Staff

21,154

12,814

6,818

2,381

Total No. of Members (in '000)

6,780

3,953

1,879

603

Amount Disbursed for the period (INR crores)

7,618

4,485

1,680

452

Portfolio outstanding (INR crores)*

4,321

2,456

1,051

276

*

includes assigned loan portfolio

Financial Information

FY10

FY09

FY08

FY07

Revenue (INR crores)

958

554

170

45

PAT (INR crores)

174

80

17

2

Assets (INR crores)

4,055

3,039

1,089

335

Networth (INR crores)

950

664

212

71

delivery, transparency and innovative products. Operational Information FY10 FY09 FY08 FY07 Total no. of Branches 2,029
delivery, transparency and innovative products. Operational Information FY10 FY09 FY08 FY07 Total no. of Branches 2,029
© Copyright 2009 SKS Microfinance, All rights reserved. SKS Microfinance follows the Joint Liability group Model.
© Copyright 2009 SKS Microfinance, All rights reserved. SKS Microfinance follows the Joint Liability group Model.

© Copyright 2009 SKS Microfinance, All rights reserved.

SKS Microfinance follows the Joint Liability group Model. The methodology involves lending to individual women, utilising five member groups where groups serve as the ultimate guarantor for each member.

Our approach is to provide financial services at the doorstep of members in villages and urban colonies. This allows the poor convenience and savings in terms of cost and time associated with travelling to mainstream banks and enables SKS staff to promptly and fully collect repayments.

Our loans are designed for convenience with small weekly repayments corresponding to cash flows. Small first loans inculcate credit discipline and collective responsibility. Interest and loan repayments are simplified for easy comprehension.

From village selection to loan disbursal, SKS follows a clear process in its operations. Details of our operational methodology are captured below :

© Copyright 2009 SKS Microfinance, All rights reserved. SKS Microfinance follows the Joint Liability group Model.

Before starting operations, our staff conduct village surveys to evaluate local conditions like population, poverty level, road accessibility, political stability and means of livelihood.

Before starting operations, our staff conduct village surveys to evaluate local conditions like population, poverty level,

After a village is selected, SKS staff introduces the community to its mission, methodology and services.

Before starting operations, our staff conduct village surveys to evaluate local conditions like population, poverty level,

Follow-up with interested women, and direct appeal to those who may not have attended earlier because of religious, class, caste or gender barriers.

Before starting operations, our staff conduct village surveys to evaluate local conditions like population, poverty level,

Women form self-selected five-member groups to serve as guarantors for each other. Experience has shown that a five-member group is small enough to effectively enforce group peer pressure and, if necessary, large enough to cover repayments in case a member needs assistance.

Before starting operations, our staff conduct village surveys to evaluate local conditions like population, poverty level,

CGT is a four-day process consisting of hour-long sessions designed to educate clients on SKS processes and procedures and to also build a culture of credit discipline. Using innovative visual and participatory teaching methods, SKS staff introduces clients to our financial products and delivery methods. CGT also teaches clients the importance of collective responsibility, how to elect group leaders, how to affix signatures, and a pledge that serves as a verbal contract between SKS and its members. During this training period, SKS staff collects quantitative data on each client to ensure qualification requirements are met, as well as to record base-line information for future analysis. On the fourth day, clients take a “Group Recognition Test” conducted by a different staff member than the one who trained them. If they pass, they are officially accepted as SKS members.

Before starting operations, our staff conduct village surveys to evaluate local conditions like population, poverty level,

As additional groups are formed within a single village, a Centre (sangam) emerges. During Centre Formation, groups are combined to form a centre of 3 to 10 groups or 15 to 50 members. Weekly Centre meetings serve as a time to conduct financial transactions. Meetings are held early in the morning, so as to not interfere with clients’ daily activities.

A leader and deputy leader are selected to facilitate meetings and ensure compliance with SKS procedures. In addition to financial transactions, members use the weekly meetings to discuss new loan applications and community issues. Centre meetings are conducted

with rigid discipline in order to sustain the environment of credit discipline created during CGT.

SKS Microfinance firmly believes that Technology is one of its biggest differentiator in the industry. For SKS, Technology is an investment that is adding value to what and how we offer financial solutions to our customers. SKS Microfinance is among the first to develop and deploy an industry standard MF technology platform in-house, delivering superior value to our end customers. The systems designed and deployed at SKS have enabled the business to grow to nearly 6.78 Million customers and are providing the technology foundation to achieve the next phase of growth.

SKS has designed and deployed a web-based Business Intelligence portal using state-of- art technology and a highly flexible and scalable platform to support the business growth and operations.

SKS Microfinance has also built an integrated and encrypted MPLS communication network encompassing a world class Data Centre delivering mission critical services and enhancing collaboration across the organisation, thus ensuring superior service quality to its customers.

SKS has entered into strategic partnerships with various technology leaders and innovators like Microsoft, Wipro, Reliance, HCL and Sify to establish an agile and scalable technology architecture that is capable of handling the challenges specific to the microfinance sector.

Sangam Leader Meetings provide an interactive platform for SKS members. Thousands of our centre (sangam) leaders help in gathering member feedback on SKS services and help us better understand their needs. In FY09, through the 150 Sangam leaders meeting conducted, we managed to reach out to approximately 60,000 Sangam leaders representing 2.8 million members in the states of Andhra Pradesh, Karnataka, Maharashtra, Orissa, West Bengal, Madhya Pradesh, Chhattisgarh, Gujarat, Rajasthan and parts of Uttar Pradesh. Special desks and suggestion boxes are set up at the SLMs where member feedback and issues are registered and addressed. Surveys on existing products happen at every SLM. These sessions also help members understand and know SKS better. The SLMs are a great way to connect with our members and build brand loyalty. Many of our new initiatives like retail insurance, education and housing projects are an outcome of feedback and inputs received at SLMs. SKS expects to conduct SLMs every year across all operating states.

with rigid discipline in order to sustain the environment of credit discipline created during CGT. SKS

We are piloting a dedicated toll-free phone number for our members. This service will help members register their complaints and issues, as well as obtain information on existing products and services. The toll-free number service is monitored by a dedicated team which ensures that issues and complaints registered, are resolved in a timely manner. Software and other tools have been developed to ensure smooth operations. The service will be rolled out in phases in the coming months.

We are piloting a dedicated toll-free phone number for our members. This service will help membersVikram Akula Why should business among the very poor be different than it is anywhere else? Listen to customers, standardize processes, and don’t be afraid to make a profit. Read the Executive SummaryPrintEmailPurchase Article ∑ Text Size ∑ Decrease Font SizeIncrease Font SizeEmail ∑ Tweet This ∑ Post to FacebookShare on LinkedInPrint Featured Products " id="pdf-obj-14-4" src="pdf-obj-14-4.jpg">

We obtain feedback from group leaders through pre-paid postal letters. The letters are pre-printed in vernacular languages with well-defined fields where group leaders provide feedback. In the first phase of this initiative, more than 65,000 letters have been dispatched to group leaders of selected branches in Andhra Pradesh, Karnataka, Bihar, Uttar Pradesh and West Bengal. Nearly, 4,000 of these letters have been received and data is being collated.

Business Basics at the Base of the Pyramid

Why should business among the very poor be different than it is anywhere else? Listen to customers, standardize processes, and don’t be afraid to make a profit.

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by Peter Bregman, Ariana Green, Gill Corkindale, David Silverman, Daisy Wademan Dowling, Nick Morgan, Jodi Glickman Brown, Boris Groysberg, Robin Abrahams

It’s not every day that a fellow who runs a $250 million financial services firm has a fatwa, or Islamic religious ruling, issued against him. But that’s what happened four years ago when my then $7.3 million company, SKS Microfinance, started doing business in Nizamabad, India. Armed with broken bottles and machetes, a gang of local thugs intimidated, attacked, and stole cash from some of our loan officers. They tried to extort money from us in exchange for permitting SKS to operate safely in the region. When we refused to pay, they spread rumors that we were trying to convert people to Christianity. The fatwa, handed down by local clerics, said it was a sin to borrow from us.

We knew if we became complicit with a culture of extortion, our customers would be the ones to suffer. They barely had enough money to meet basic needs, never mind pay off bad guys. So we walked away from our $285,000 portfolio in Nizamabad. By not giving

in to the thugs, however, we won some respect in that town and in other villages where we were doing business.

Many companies say they protect the interests of their customers. Very few actually sit in the dirt with them, using stones, flowers, sticks, and chalk powder to figure out if they’ll be able to repay a $20 loan at $1 a month. With this approach, we’ve created our own loyal “gang” of over 2 million customers.

SKS is like any other healthy high-growth business, except that our customers have almost no money. Consider the plight of Saryamma: She and her husband were landless laborers who earned about $1 a day. Persistent drought often made work and food scarce. Saryamma’s husband entered into bonded labor, a form of indentured servitude that still exists in India, just so the family would have enough money for grain. Her oldest son was forced to seek work rather than attend school.

In 2002, Saryamma joined our program and recruited four other women from her village who wanted loans. In line with our group-lending model, each loan was linked to the others: If one woman couldn’t pay her small weekly installment, the rest of the women chipped in; if she refused to pay, the others pressured her into meeting her obligation. Saryamma initially borrowed $200 to buy a buffalo so she could sell the milk. She took one year to repay, in weekly increments of $4.50. In subsequent years, she took out other capital loans, eventually adding three more buffalo, a cow, two acres of land, and a pair of bulls to her portfolio. Her family’s net income has increased to $10 a day, propelling her firmly into India’s lower middle class. Her husband is now free from bonded labor, and Saryamma’s youngest children are the first in the family to attend school.

Saryamma’s story illustrates that providing loans to women is a sure way of making microfinance work. Studies have shown that women are more likely than men to reinvest profits in the household and to support others in their borrowing group. That’s why we lend only to women.

How do we manage to help women like Saryamma on such a large scale? From the beginning, SKS’s deliberate strategy has been to bypass the usual conventions of poverty-eradication programs. By reenvisioning microfinance, we have achieved excellent customer and business relationships throughout India.

Rethinking Microfinance

A fatwa is hardly the only scary thing my company has encountered on its path toward rapid growth. Much more worrisome is the slow rate at which our industry has been able to gain traction and deliver broadly on its promise.