How to rating micro finances ?

1. Rating
of
"SANGHAMITRA RURAL FINANCIAL
SERVICES"
1
Presented By: Group No. 3
Antaryami Karjee (17201010)
Dharamanada Bhoi (17201021)
Gonshai Murmu (17201025)
Jhansirani Hembram (17201028)
Naresh Majhi (17201039)
Sunit ku. Bharati (17201055)
Pijus Naiding (17201044)

2. Flow of Presentation
• Introduction
• Main performance indicator
• Highlight/ Rating Rationales
• Sources of Fund
• Comparatives Performance Highlight
• Country Overview
• Categories of Institution
• Types of MFI
• Microfinance policies
• Govt. and Strategic Positioning
• Organization and management
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3. Introduction
• SRFS is section 25 company based in Bangalore,
Karnataka
• Promoted by MYRADA, well known NGO in 1995
• Currently SRFS provides credit to group promoted by
MYRADA & other NGO as well
• Besically works SHGs bank linkage model
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4. Main performance indicator
Particular Mar-07 Mar-08
Gross portfolio (Rs.cror) 32.8 48.6
Number of Member 107119 130048
ROA 0.9% 0.1%
Portfolio Yield 14.2% 14.7%
Portfolio at Risk (>90 days) 3.8% 5.2%
Operting Expense Ratio 4.4% 3.6%
Average Loan O/s per SHG (RS.) 49635 59743
Member per field staff 2142 2365
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5. Highlights/ Rating Rationale
 POSITIVE :-
• Support of MYRADA
• Strong Board
• Improved Operational Strategy
1. SRFS is promoted by MYRADA
2. Basic is SHGs bank linkage
programme in Karnataka
3. MYRADA Provides facilitates its
operations and training purpose as
required by SRFS
1. Strong eleven member of Board
2. Members are both Development &
Micro Finance sector like, Padmashree
A.P Fernandez and Prof. M.S Shriram
3. Six Board member are External
1. Management implemented a
hub and spoke structure
2. improve control and decision
making
3. Set specific day in a month for
collection 5

6. • Low Operating Exp.
NEGATIVITY :-
• Weak second line of leadership
• Weak MIS reporting
• Increasing PAR > 90
• Reducing Profitabilty
• Limited initiative sharing with partner
1. Operating exp of SRFS is
remarkable low i.e. 3.6%
2. Group mobilisation and training
done by its partner
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7. Sources of Fund
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8. Comparatives Performance Highlights
Indicatot / ratio September 2003 March 2008
1. Growth
Gross loan o/s 6.5 crore 48.6 crore
O/s borrowing 3.4 crore 41.6 crore
No. of SHGs 1,944 8,128
Avg loan size to SHGs 48,777 59,743
2. Credit performances
Portfolio at risk(>=60 day) 6.1% *
Portfolio at risk(>=90 day) * 5.2%
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9. Comparatives Performance Highlights
Indicatot / ratio September 2003 March 2008
3. Efficiency and profitability
SHGs per field staff 50 148
Net loan to asset 82.7% 94.3%
Operating expenses ratio 9.6% 3.6%
Annual returns on asset 3.5% 0.1%
Operating self satisfactory 131.6% 100.7%
Financial self saticfactory 85.7% 95.7%
Capital adequecy ratio 55.3% 12.2%
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10. Country Overview
• India has one of the most extensive banking infrastructure in the
World where million of poor people don’t have access to basic
banking service.
• In the past both public and private commercial banks perceived
in India rural banking as a high transaction cost and high level of
uncertainty.
• Rural borrowers felt that banking procedures ware cumbersome
and that banks were unwilling to give theme credit.
• In the early 1990s, The microfinance business was given a
innovative initiatives taken by non government microfinance
institution(MFIs). They offered micro credit to poor people and for
self employment in rural area.
• The inadequacy of the banking sector to meet the need of the
poor deposit vast infrastructure was explored by NABARD.
• MFI are now experimenting with new product (Housing Loans,
micro insurance, investments, remittances) and loans to
individuals and some MFI are also diversifying into livelihood
support to offer more value to client.
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11. Categories of Institution
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12. Types of MFI
Types of MFI Estimated Number Legal Status
1. Not for Profit MFI
NGO MFIs 400-500 Societies registration act, 1860
Or Similar provincial act
Indian Trust act, 1882
Non profit companies 10 Section 25 of the companies
act, 1956
2. Mutual Benefit MFI
Mutually-Aided cooperative
societies(MACS)and similarly
set of institutions
200-250 Mutually Aided Cooperative
Society Act enacted by state
Government
3.For Profit MFI
Non Banking Financial
Companies
(NBFCs)
25 Indian Companies Act, 1956
Reserve Bank of India Act,
1934
Total 700-800
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13. Microfinance policies
• It lends to SHGs formed by MUDRA and others partner
NGOs.
• One SHGs can have 15-20 members
• A Credit Officers can manage maximum 150 SHGs
• The maximum numbers of COs in a Branch Office is four
• A Portfolio Manager can manage maximum 500-600
SHGs
• Loan size range is Rs. 10,000 to Rs. 5,00,000 for SHGs
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14. Microfinance policies
• In the past there ware no client meeting and staff
went to village some time but after restructuring
process, staf attend SHGs meetings time
between the 15th-19th of each month.
• In which have compulsory participate, as well as
submit there payment in cash
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15. Microfinance policies
• Loan product
Target Clints Women
Time period 1-3 yr
Registration charge Rs 50 (for 3 yr)
Services charge 1%-2.5%
Interest rate 16% pa
Loan amont Up to 5,00,000
Repayment policy Instalments
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16. Government and Strategic
Positioning
Board:
SRFS has a strong Board comprising 11 members. The
Board has 5 internal (4 from MYRADA) and 6 external
members. The Board has adequate representation from both
corporate and development fields
Operational and growth strategy:
Sanghamithra now operates only in rural areas
SRFS plan to consolidate and grow i.e. Bangalore,
Dharmapuri, Mysore and Gulbarga and also expand
geographically in other areas of Karnataka and Tamil Nadu
based on credit demand and presence of a critical mass of
SHGs
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17. continue.....
Competition:
The competition for SRFS is dual, one at the NGOand the
other at the SHGs level.NGOs are increasingly getting
attracted by the better incentives offered by other finance
providers and SRFS also faces competition from direct
lending MFIs like SKS, GK, Spandana, Share, BSS and
Ujjivan.
Legal Status:
RFS currently operates as a Section 25 Company and it
plans to continue it’s not for profit status in future
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18. continue......
Second line of leadership:
The second line of leadership in SRFS is weak
TheHOOs have good operations expertise and can be
trained for being a future organisational head and fresh
graduate from renowned institutes for senior management
Fund mobilisation:
SRFS has borrowed funds from diversified sources and
the total o/s long-term borrowings as on 31 March
2008 were Rs41.6 crores
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19. Organization and management
 Human resource quality and management
• There is no dedicated HR team.
• HR functions is Handled and coordinate by the CEO with the
help of other operation staff.
• There is no staff incentives is provided in SRFS
• Wage revision is done once in 3 years according to the
performance appraisal.
 Staff productivity
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20. Operating expenses ratio
The Operating Expense Ratio (OER) of SRFS in 2007- 08 is good at 3.6%. It
has reduced considerably from 4.4% in 2006-07.
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21.  Accounting for MIS
• SRFS has a computerised MIS and accounting system. Earlier
the organisation’s operations data was maintained only in
Mysore.
• The field staff used to send the receipt and payment details to
Mysore. However, under the new structure all the divisions will
maintain operations data.
• All the branches will send the receipt and payment details to
their respective divisions and this would be consolidated in the
DO.
 Tracking system for overdue
• The tracking system for overdue is moderate. Earlier repayment
collections were done all through the month which led to flexible
payments and eventually delinquency, as well as masked
overdue.
• The new management has made it mandatory to have all
repayment collections from 15-19 of every month, with fixed
meeting times and venues for each borrower group.
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22.  Internal control system
• Under the new structure all the branches in an area will report to
the Division, thereby facilitating better control on the field staff’s
operations.
• All the staff (above CO level), have been given strict instructions
to prepare monthly monitoring schedules and adhere to it in
regularly visiting field operations.
• Recently SRFS has formed its own internal audit department and
its systems are being put in place.
 Financial planning
• The financial planning system in SRFS is moderate to good. A bottom-up
approach is used to set annual targets, which is finalized by the top
management with inputs from the field staff.
 Infrastructure
• The net fixed assets of SRFS amount to Rs 14.9 lakh and mainly
comprises office equipments, computers, furniture and fixtures
and vehicles. As on 31 March ’08, these 4 heads contributed to
51.8%, 14.8%, 5.7% and27.7% respectively. 22

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24. Thank You
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