G.R. Chintala, NABARD, Bangladesh, Partnerships that Build Bridges to New Fro...
PN Vasudevan Is Transparency Enough?
1. Fair & Transparent in Pricing
- The Equitas Model
Presentation by P N Vasudevan
The contents of this presentation are meant only for the persons/organisation to whom this presentation is
made / sent. The Information herein Is shared in confidence for use only for the purpose & benefit of
Equitas Micro Finance India P Ltd.
2. Private & Confidential
Facets of the Model
What is fair
pricing
Beyond Responsible
MFI Pricing Transparency
Efficient
Operations & Risk
Management
3. Private & Confidential
What is fair pricing?
Fair Pricing is the result of:
1. Cost of growth being borne by investor, only steady
state cost by borrowers
2. Assumption of high operating efficiency on back of
best technology & processes - benchmarked to retail
banking
3. Delinquency provision assumption based on national
level delinquency of MFIs
4. Reasonable return assumption (Return on Equity to
be capped at 20%)
….. And finally the PRIDE of being the best!
4. Private & Confidential
Pride in Fair Pricing
Cost of
Lending growth Fair
High lending
rate linked Efficiency borne by
to RoE Investors rate
• Even at the time of its launch in 2007, Equitas charged all-
inclusive reducing balance interest rate of 26% based on a
steady-state target op-ex of 7.5% rather than Equitas’ then
opex of 21%. The lowest lending rate by other MFIs was at
32%
• We communicated reducing balance rate while the market
was on flat rate basis!
5. Private & Confidential
Transparency
• Clear communication of
all-inclusive reducing
balance IRR (APR) interest
rate
• Borrowers
can compare
across MFIs
• Admin feefor term life
insurance cover published
in passbook
6. Private & Confidential
Pride in Transparency
• Chuck Waterfield (MFTransparency
initiative): “I find what Equitas is doing
to be quite progressive in the area of
consumer protection and
transparency… and Equitas is possibly
the only MFI in the world to mention the
APR in the passbook”
.. Mail dated Tuesday, Dec 09, 2008
7. Private & Confidential
Efficient Operations & Risk Management
Centralized Real-time Pre-printed Automated Consistently
collections repayment forms Risk good quality
back-office Management
monitoring stickers processing service
Operations Philosophy
• At Branches, client-facing activities only will be conducted by field staff. All other activities will
either be outsourced or centralized
• No reports required from branches, if they can be generated by HO
9. Private & Confidential
The Equitas Ecosystem
Skill development
Financial • Over 250,000
commitments trained so far
•5% of profits to
Food Security
Equitas Trust Healthcare Improving
• 15% of networth • 20 Stores
for purchase of land
• Over quality of running
600,000
& construction of families members’ • 8% cost
benefit to
building for Gurukul benefited lives clients
• 6% of profits for
healthcare & skill
development School education
initiatives • 50 Tuition
Centres
• Four Schools
10. Private & Confidential
What do we want to be known for?
• Most Fair MFI?
• Transparent beyond compare?
• Customer Friendly practices?
• Efficiency & productivity leading to returns?
OR
• The MFI which made the most money?
