Dear Friends, Jan
13, 2006
Portland,
OR
Probably many of you are
aware of a bold effort by SEEDS to provide a renewed but fresh and
“system-wide” approach to micro-finance for the poor in Orissa. This project is
lead by Mrs. Ranu Mahanti, a SEEDS member, and Mr. K.C. Mallick, head of a
partner NGO called BHARAT
INTEGRATED SOCIAL WELFARE AGENCY
(BISWA). You will find the motivation and the description of this initiative at
BISWA-SEEDS Microfinance project of SEEDS:
Micro finance helps reduce
poverty through increase in income, allowing the poor to build assets and
“capacity” of various kinds, and reduce their vulnerability. Microfinance
clients are overwhelmingly female. Microfinance has been widely credited for
empowering women by increasing their contribution to household income, the
value of their assets, and control over decisions that affect their lives.
Households that have access to microfinance spend more on education than
non-client households. Microfinance contributes to improve nutrition, housing,
education, and health of the participants.
After a year-long effort,
we are ready to launch a bold, refreshing and potentially far-reaching
capability – a people’s own micro finance bank in Orissa - to address
socio-economic issues of poverty. However, we are not there yet, and we
fervently need your help. Bell Weather Company of Netherlands, which works as a
venture capital to assist in promoting MFB, has agreed to invest 49 lakhs
(about 110,000 dollars) as equity capital. Also, they have agreed to give 1
crore as a loan for five years at 7.5 interest rate. As a rule a non profit
organization (NGO), can't invest directly towards the equity capital for a non
banking financial company. Thus we are
trying to raise (under leadership of our coordinator Mrs. Ranu Mahanti) the
other 51 lakhs (about $114,000) to apply for the RBI license for establishing
the BISWA micro-finance bank.
We have raised $87,700 of
investment from several socially-conscious investors among you complemented by
some donations collected through SEEDS. We need about $27,000 to complete our
crucial goal. We are looking for socially-conscious
investment from you: BISWA and Mrs. Mahanti have promised a return of 5% for
your loan for a period of 5 years. (If you want to invest
beyond this minimum that and depending on a large amount you want to invest you
may negotiate with BISWA for a mutually agreeable higher interest rate.) Imagine
what impact your action could have.
Any new investment
amounts, and the old pledges not sent in yet, should be sent urgently to Mrs.
Mahanti’s home address (1210
Whittier Drive, East Lansing, MI 48823).
Dr. Bhanu Mahanti (her husband) will mail the checks to BISWA. Mr. Mallick is
planning to apply for the license by end of this month – for there are numerous
downsides and opportunity costs to waiting too long.
In
the following, based on and compiled from information I received from Mr.
Mallick, you will see strong, well-thought out plans for the micro-finance
strategy, the significant work that has already been accomplished, and the
credibility of the approach.
Thus,
on behalf of SEEDS, I strongly urge you all socially conscious individuals and groups of change to contribute
to help realize the goal outlined above and elaborated below.
Priyadarsan (Darshan) Patra
SEEDS (please join seedsnet at yahoogroups.com)
myseeds.home.comcast.net
www.seedsnet.org
p.s. This author has contributed
upwards of $2000 in investment and donation to this project, and is willing to
provide another challenge matching to motivate others to join in.
BISWA is
located at DANIPALI
P.O: BUDHARAJA, SAMBALPUR-768004, ORISSA (INDIA)
Registered
under: Societies Regn. Act XXI of
1860 Vide Regd. No. 20060/41of 2005-06.
FCR Act Regd. No. 105060053. Exempted under section 12 A & 80 G of
Indian Income Tax Act.
BISWA believes in sustainable development
of community through an interwoven strategy. Thus it has 3 components:
Micro-Finance, Micro-Enterprise, and Social-Development. BISWA appreciates
past involvement and expects future NRI
investment for positive socio-economic change in the following areas:
o
Support for Basic Needs like Drinking Water
o
Health Care through establishment of CBD Centers, regular health camps
o
Child labor eradication, mainstreaming to regular school education
system through innovative schools
o
Establishment of water harvesting structures supporting
micro-irrigation activities
o
Micro-finance and enterprise
activities for the neediest (the topic discussed at length below)
o
Environmental protection thru plantation leading to income-generation
supported by SEEDS
o
Eye-operation through eye camps
BISWA’s Vision
Statement
To increase the
availability of wider range of micro-finance services for poor (predominantly
rural) women and their use of those services through the process of expansion
as well as consolidation of this micro-finance program and creation /
facilitation of a sustainable community based Micro-Finance Institution within
the year 2006.
Mission Statement
o
Bring recognition, legitimacy, respect and opportunity to the 10,00,000
of micro-entrepreneurs in Orissa.
o
Create a level playing field for every micro-entrepreneur so that they
qualify for the mainstream finance.
o
Revive the root of banking, so that credit is once again based on trust
and peer pressure so poor can be served.
o
Make a real and lasting psychological, social & financial impact on
individuals; help build strong, cohesive communities; and generate substantial
job opportunities and economic benefit for society as a whole.
OBJECTIVES
o
Bridge the gap between credit demand and
supply.
o
Provide collateral free loan to the poor.
o
Influence economic, fiscal and social
administration policies favoring the poor and the deprived.
o
Collaborate with people and institutions with
similar objectives as that of BISWA.
STRATEGY:
o
Identification of members for SHGs
o
Credit to the SHGs for economic activities
o
Women focused
o
Promotion of Community Based Organization
(under Trust Act as Mutual Benefit Trust taking SHGs as members)
o
Provide Collateral-free Loans
o
Encourage Savings for Capital Growth
o
Provision of Life and health Insurance
o
Flexible Repayment Period
BISWA
micro-Finance Products:
Saving
o Compulsory
savings by SHGs for creation of their capital base.
o Utilized
for internal credit purpose/ margin money/ administrative expenses
o It
is not collected by BISWA.
Credit
o 3
Types: Production, Consumption & Trading.
o Extended
to qualified SHGs
o Maximum
Repayment Period is 2 years.
o Door-Step
Delivery
o Hassle-free
and Adequate Loan
Insurance
q Collaborated with ICICI-Lombard for health
& Accident death of SHG members and their two nominees
q Collaborated with L.I.C. of India under
Janashree Bima Yojana covering life of SHG members
Lending
Institutions leveraged in India:
o
CARE CASHE
PROJECT
o
NABARD
o
SIDBI
o
Friends of Women World Banking India
o
ICICI Bank Ltd.
o
Rashtriya Mahila Kosh (RMK)
o
Regional Rural Banks (BAGB)
Micro-Finance
Outreach as of
31st October-05
o
Operating in Orissa with 30 Districts
o
8762 Self Help groups, 134986 Members
o
credit
linked with BISWA for 5433 SHGs (74432 members)
o
17 nos. of Federation (11 are registered as
MBTs under Indian Trust Act.)
o
No. of FFIs linked :
13
o
No. of Staff in microfinance
: 143
Micro-Finance
Status as of 31st Oct. 2005
o
Savings Mobilized Rs. 3,79,13,223 /-
o No
of Loan 5,433
o
Loan Amount Rs.
22,34,64,788/-
o
Average Loan Size Rs. 41,131/-
o
No. of loan outstanding 3,995
o
Loan Outstanding Rs.
12,18,55,122 /-
o
Operational Self Sufficiency 92%
o
Portfolio at Risk 0.50%
o
Repayment Rate 99.5%
o
Coverage of Client under
o
JBY of LIC 18278
o
Coverage of Client under
o
ICICI-Lombard Health 6809
o
Insurance Claimed (JBY) 16
o
Claims Settled (JBY) 14
Important
Financial Ratios:
o
Return on performing assets- 7%
o
Financial Cost ratio- 1%
o
Gross financial margin- 6%
o
Net financial margin 5.9%
o
Operating cost ratio 7%
o
Yield on portfolio 6%
o
Operating grant ratio 88%
o
Operational Self Sufficiency 92%
o
Cost per unit money lent 0.06
Impact of BISWA
micro-Finance Program:
At Client level
o
Changed in expenditure pattern.
o
Reduced Vulnerability.
o
Assets creation.
o
Enhanced women status.
o
Participation in social & political process.
o
Collective efforts for various social issues.
o
Changed from house-wife to Entrepreneur.
At BISWA Level
o
Able to institutionalized the microfinance
program.
o
Strengthen the capacity of the staff as well as clients.
o
Increased its outreach as well as the quality of the
program.
o
Able to build Coordination with other Institutions
o
Recognized Regionally, Nationally &
Internationally.
o
Create a platform
to replicate the experience at other Districts
o
Relationship building with other FFIs for resource
mobilization.
Ratings of the
Organisation:
o
Rated by M-CRIL in 2003 as ß
o
Rated by CRISIL as mFR4 during September 2005
o
Rated 5-Diamonds by Mix market in September 2005
o
Rated by M-CRIL in October 2005 (the report is still awaited)
BISWA microFI
Projections for next 5 years:
|
Activities
|
March
06
|
March
07
|
March
08
|
March
09
|
March
10
|
|
Amount of Disbursement
|
50 Cr.
|
100 Cr.
|
175 Cr.
|
275 Cr.
|
400 Cr.
|
|
Amount Outstanding
|
31 Cr.
|
40 Cr.
|
70 Cr.
|
121 Cr.
|
176 Cr.
|
|
Amount required from FFIs
|
33.5 Cr.
|
38.2 Cr.
|
70 Cr.
|
130 Cr.
|
162 Cr.
|
|
No. of SHGs
|
9,000
|
11,500
|
18,000
|
23,000
|
28,000
|
|
No. of Clients
|
1,34,300
|
1,81,700
|
2,84,400
|
3,63,400
|
4,42,400
|
|
No. of SHGs credit linked
|
6,670
|
10,526
|
14,583
|
20,370
|
26,667
|
|
No. of members credit linked
|
80,040
|
1,26,312
|
1,74,996
|
2,44,440
|
3,20,004
|
|
No. of Federation/ MBTs
|
30
|
75
|
125
|
200
|
300
|
|
Operational Self Sufficiency (O.S.S)
|
102%
|
113%
|
122%
|
152%
|
176%
|
Action taken to
achieve the Projections:
§
Promotion of Federations
§
Federations (Mutual Benefit Trusts or MBTs) are
clusters of SHGs having legal entity under Indian Trust Act .
§
Federations are self sustainable client owned
client managed organizations
§
Federation consists of SHGs ranging between 11 - 50.
§
Federations provide scope for financial and
social intermediation for member SHGs.
§
Federations builds
capacity of member SHGs.
§
Promotion of Non Banking Financial Company
(NBFC)
§
The proposed entity is to be registered as
NBFC under Reserve Bank of India in RBI Act.
§
The NBFC shall mobilize financial resources
to fulfill the credit needs of the MBTs and BISWA.
§
There shall be no transfer of assets or
liabilities from BISWA to the NBFC.
§
It will partly contribute to the social
development initiative of BISWA.
§
Promotion of Micro Enterprise Development
Institute (MEDI)
§
The proposed entity is to be registered as
not for profit company under Companies Act
§
The MEDI shall act as a resource center for
development of micro enterprises.
§
The MEDI shall Facilitate
forward and backward linkages for micro-enterprises.
§
The MEDI shall promote export of SHG products
Ground work done
so far in nutshell:
§
17 Federations are promoted out of which 11 are registered as MBTs.
§
Hired professional services for proposed NBFC and
MEDI.
§
Approved by the Registrar of Companies.
§
Title accepted for NBFC as ‘BISWA micro Finance Foundation’
§
Title accepted for MEDI as ‘Laxmipriya’.
§
Approached Bellwether for equity support: 1.5 crores
Steps for resource
mobilization:
§
Proposed to various banks and FFIs for revolving loan fund assistance
(RLF)
§
Proposed to SIDBI for RLF and Capacity building
assistance, Computer systems for branches.
§
Proposed to SIDBI for transformation loan
assistance.
§
Proposed to CARE for support for accelerating existing mF program
Summary History of
BISWA Microfinance:
§
In 1996 BISWA started its microfinance
activities.
§
Initially the activity was only concentrated
in Sambalpur District
§
The external credit facilities to the SHGs
were either by directly linking the SHGs to the Banks or BISWA availing small
loans to extend the credit.
§
NABARD was first apprised of the SHG promotion
of BISWA and extended promotional grant support.
§
In June-2002 CARE-India (Orissa) came up with
the CASHE Project and partnered with BISWA for Sambalpur District.