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Annual Report 2014-15

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Annual Report 2014-15 1 annual report 2014-15 2014-15 Microfinance Institutions Network annual report annual report 2014-15 contents 4 | President’s Message 6 | CEO’s Message 1 2 8 | About MFIN 20 | Governance 3 4 32 | Our Work 51 | Industry Trends 5 6 56 | Microfinance Plus 64 | Awards and Recognition 7 Annex 1: List of MFIN Members 67 | MFIN Financials Annex 2: Board Attendance Annex 3: Abbreviations 3 2014-15 annual report President’s Message Dear Friends, I have had the privilege of being part attention and not mere lip service of the team led by visionary Vijay from the Central Government Mahajan since 2009 when 23 MFIs and the Reserve Bank of India got together and set up Alpha to (RBI). Prime Minister Modi has bring new discipline and direction to put financial inclusion at the top of the microfinance sector. The first act the government’s agenda with the was to contribute to a corpus of Rs. spectacular launch of Jan Dhan 2.5 crores and invest in High Mark Yojana, MUDRA Bank and the in order to put in place credit bureau various insurance programmes. He services for the sector. MFIN was has set a hectic pace; yet as a realist formed in November 2009 with the he realises that a comprehensive main objective of establishing itself financial inclusion for the poor as a Self-Regulatory Organisation is likely to take 20 years - RBI’s (SRO). Alok joined MFIN as CEO centenary year. The RBI under the in July 2010. I had to fill in the big leadership of Governor Raghuram shoes of Vijay once he retired as Rajan has taken the pro-active step President in July 2013. We have to launch two new types of banks to crossed many hurdles, weathered promote financial inclusion: the Small major storms, and achieved many Finance Bank (SFB) and the Payment of our key goals – separate NBFC- Bank. In addition the big elephant in MFI Category; RBI regulations the pack is the possible conversion on responsible lending practices, of the Indian Post Office to a bank. through interaction with Malegam The two new commercial banks: Committee; MFIN recognised as a Bandhan and IDFC bank will also SRO and; announcement of Small be major players in this space. RBI, Finance Bank amongst others. It based on the good track record set is now my turn to hang up my hat. by MFIs after the crisis in 2010, has We as an industry are at a height considerably liberalised the scope of never before achieved in terms of business and permitted us to move our reach and recognition. But at to serve higher economic segments the same time there are many major like micro- entrepreneurs currently changes which are in progress. not served by MFIs. One thing is for The rivers of financial inclusion are certain, the environment in which shifting course. It will be necessary we operate and how we operate will for MFIN to re-invent itself to completely change in the next few remain relevant. years. This is a problem of success! Future of the Industry Let us begin backwards – RBI’s new Financial Inclusion in India is in a guidelines to MFIs. The permitted state of change. For the first time in loan sizes up to Rs. 1 lakh will require the last decade, it is receiving real a different approach and skill set than the traditional group lending. Liquidity Ratio (SLR) requirements. execution where all parties have a Those who make the transition win-win situation. to individual lending will succeed. Finally, the business the SFB has to The path may be littered with undertake, which is characterised by The success of Jan Dhan Yojana irresponsible lenders who take this very high volumes, low transaction and the insurance programmes will as a license to grow their portfolio ticket sizes and customers requiring depend on the regular commercial without making appropriate ‘high touch’ door step delivery will banks’ ability to service the vast changes in the way they conduct require radically different business number of customers effectively. the business. MFIN and Sa-dhan models. SFBs will have to innovate The banks are not geared to do as SROs will need to play a key using the latest technology and this type of business. The business role in monitoring and guiding the explore paths which have not been will have to shift to the two new Members appropriately. taken. How many of the 72 current commercial banks, Post Office Bank contenders will establish and run and SFBs. Second, the SFB license. The MFIs successful SFBs in the long run is a have a head start to get these big question. This is the grand test Conclusion: licenses despite 72 contenders in RBI is undertaking. It will have to I thank all the Members for the initial line up. Seventeen NBFC- start with the selection of the best reposing their faith in me for the MFIs have applied. The MFIs have candidates to take up this challenge. last two years; the fellow Members an advantage, as they already serve SFB is not for the faint hearted. of the Board for their invaluable the same market segment. The contribution; all the success we Governor indicated to us that he The MUDRA Bank is an excellent achieved would not have been would like to see the best MFIs get initiative to accelerate the process possible without the outgoing the license. However, successfully of financial inclusion by providing CEO – Alok Prasad and the entire setting up a SFB is like winning a funding channelled to micro- MFIN Secretariat. I wish Ratna steeple chase race. The first hurdle entrepreneurs. Here again the MFIs Viswanathan all the success as the is to obtain the provisional license. have a head start. In order for this new CEO. I am confident that MFIN MFIs who are successful in the initiative to succeed it is important will continue on the goal set by first phase, will need to restructure that the RBI’s regulations for MFIs the Founder President, ‘engines of and raise domestic capital in order and Priority Sectors works hand- inclusive growth’. to obtain the final license after 18 in-glove with the MUDRA initiative. months. The paucity of domestic There are challenges of pricing of Yours truly, capital and legal/regulatory hoops loans in order for the business to the organisation has to go through become viable and also to ensure Samit Ghosh will pose the second major challenge. it is politically acceptable. The President MUDRA card which is a good idea Third, once the SFB’s start will provide working capital for June 20th, 2015. operations, the biggest challenge micro entrepreneurs and will require will be converting the liability side of high level of coordination between 5 the balance sheet to conform to that banks, MFIs and MUDRA. This is a of a bank and comply with the Cash game changing initiative but success reserve Ratio (CRR) and Statutory will depend on coordination and 2014-15 annual report CEO’s Message Dear Friends, On 5th December, 2014, MFIN me do a listing of these defining celebrated its fifth anniversary. In moments. India the number five or ‘panch’ is regarded as very special. Equally, • 2010 – The first IPO in the in other cultures across the world industry (and still the only). this number holds tremendous • 2011 – Creation of the NBFC- significance - be it the five classical MFI category by the Reserve elements in Greek philosophy or Bank of India (RBI). the five core commandments in • 2012 – Introduction of the Buddhism or even the five rings in Microfinance Bill in Parliament. the Olympics logo. • 2013 – Malegam Committee’s recommendations fully MFIN’s five year journey has implemented and industry firmly mirrored the fortunes of the back on the growth path. microfinance industry. The • 2014 – MFIN recognised as SRO euphoria of the first nine months by the RBI – a first ever in the of 2010, the unremitting gloom financial services industry. of 2011, the struggles of 2012, • 2015 – Small Finance Bank the feeling of hope in 2013, and framework (and the MUDRA finally, the success and smiles of Bank announcement !) 2014- 15. Looking back, in each of these years, something unusual It is almost as if the industry has happened for the industry. Each within this short span of five years of these years held a defining gone through the full karmic cycle of ‘moment’ for the industry. Let birth and rebirth. The remarkable turn-around of the Guidelines were released by the Financial Inclusion Conference in Industry is best evidenced by the RBI. A significant number of MFIs Mumbai on 2nd April (celebrating following key metrics: applied for the SFB license. The RBI’s 80th anniversary) said, ‘ MUDRA Bank initiative got off the Strong national institutions are hard • As on 31st March 2015, NBFC- ground. The PMJDY Scheme gave to build. Therefore, existing ones MFIs provided credit to over a whole new meaning to financial should be nurtured from the outside, 3.05 crore clients inclusion with over 1.5 Cr basic and constantly rejuvenated from • The Industry Gross Loan banking accounts getting opened. the inside…..” As I step down as the Portfolio stood at Rs 40,138 Over the medium term, the impact CEO on the 30th June 2015, it is crores of all of these developments is likely this observation of the Governor • Total number of NBFC-MFIs to be pretty dramatic - financial that I would regard as being of the branches stood at 10,553 deepening, improved access to highest criticality for MFIN.
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