Suryapet, also called the Gateway to Telangana, is located in south eastern part of Hyderabad in Nalgonda district. It is famous for being a dustbin-free, zero-garbage town since 2003, with the local municipal council bagging various accolades at both state and central levels. This is also the home of Bandaru Lakshmi. When Lakshmi moved to Suryapet from a nearby village along with her family a few years back, her family was penniless. Her husband was worried about raising their children.
However, things changed when Lakshmi took an income-generating loan of Rs 10,000 from Swayam Krishi Sangam (SKS) Microfinance, a microfinance company.

She started to buy and sell readymade garments in the nearby villages. With her hard work, she managed to repay the loan and again took additional loans of Rs 12,000 and then Rs 14,000 to expand her business. Today, she earns a monthly income of Rs 30,000 and her eldest daughter has secured a job at Infosys.

“People look up to us now. I am grateful to god. With the support SKS extended, I could provide decent education for my children,” says Lakshmi.

Lakshmi is not the only one. Since its inception in 1998, SKS has provided loans to more than 50 lakh women across the country. Its target is to reach 1.5 crore clients by 2012.

“SKS provides credit to the poorest of women who otherwise would never get loans from a bank. Organised institutions do not trust the poor; we do,” says Pradeep V Kalra, CIO, SKS Microfinance.

Building hope
Field officers from SKS visit villages and conduct a survey that involves checking the population, the business viability of that particular village, the activities of the locals, and the scope of business activities in the region. The field officers also check for the presence of a bank in the village (for depositing the cash collected).

After the survey is conducted, a few villages are shortlisted. The team then explains the SKS model to prospective members. After the model is explained, the women have to take an ability test to pass muster.

Once the loan is granted, groups of five women are selected. One of them becomes the group leader. Responsibility is shared across all the women in a group.

“If one of the women is unable to pay for a couple of weeks, the other four contribute and pay the pending amount for her,” explains Kalra.

Initially, each member gets a loan of around Rs 10,000 for a period of fifty weeks. The repayment is done every week. On returning the money with interest, which must be done in fifty weeks, the group becomes eligible for a higher amount. SKS charges 12.5 percent at a flat rate and 26 percent at an effective rate. In Andhra Pradesh, Karnataka and Orissa, loans are extended at flat interest rate of 12.5 percent and at an effective interest rate of 26.69 percent. In the rest of the states where the penetration is low the loans are given at a flat interest rate of 15 percent and at an effective interest rate of 31.41 percent. In comparison, availing a loan from government schemes or banks attracts a 45 percent interest rate while in case of a money lender the interest rate rises to 50-60 percent.

The field force, who make up 90 percent of the SKS team, have the onus of ensuring that they reach out to members, both existing and prospective, to expand the company’s reach. These officers come from the same social segment that the organisation serves.

Empowering the field generals
The field officers normally reach their office at around six in the morning each day before they visit a village centre. In one village there could be many centres. The officers normally visit four to five centres daily. Each centre has about 30-40 members.

These officers log on to their machines and use the portfolio tracker and accounting system to generate the collection and disbursement report for that particular day and take a print out.

Moving forward, SKS plans to roll out usage of mobile devices for its officers. The field officer could directly key in all the details in the mobile (Smartphone or a BlackBerry) so that the information is directly uploaded on the central server.

“This would be a relief for our field force as manual entries would no longer be required and they could utilise their time to visit more members or villages,” says Kalra.

As there are no readymade mobile products available for microfinance in the market, SKS developed a product called SKSlite, a micro-data entry application that provides a systematic view of all transactions at the head office.

The company along with its technology partners is trying to create a mobile access layer over the SKSlite application for mobile devices. This should be completed within the next six to eight months. The application will also replace the portfolio tracker platform.

“For the application to be successful there is a lot of testing required,” says Kalra.

Another area of concern for the officers was getting a computer system to key in the entries when they reached the branch office. Each of these field officers returned to the office at almost the same time and that led to frequent delays in data entry.

“Our business model did not allow having a dedicated computer terminal for each officer,” says Kalra.

To address this issue, SKS went in for a desktop virtualisation solution from SoftXpand. The SoftXpand software turns one computer into eight fully independent computer workstations using normal hardware.

A computer terminal called as the host machine is chosen and a video card is inserted into the CPU of this computer. Another monitor is connected using the video card from the first system. For connecting an additional system another video card is inserted in the host machine and so on.
SKS has tested the solution for four systems i.e. one CPU running four computer terminals and the results have been good. The software aims to reduce the total cost of ownership (TCO) by up to 70 percent. The company has rolled out around 500 of such terminals and over the next month they plan to have another 1,000 such terminals across all their locations.

All the data entered by these officers can be viewed through the Branch Operations Console or BOC. This application was developed in-house to provide a financial and operational snapshot across branch networks.

“Earlier this was a pain point for us as it would take several days to get such information,” recollects Kalra.

The branch support is done in-house. The company has an IT team of 200 people across various regions who provide technology support to all branches. There are 28 regional offices in India, each having a regional IT manager. Every region has 100 plus branches allocated to it, and there is one engineer for every 10 to 12 branches.

Data centre operations are outsourced to a provider in Bangalore. The company is also planning to roll out a disaster recovery (DR) site that will host all the applications.

Beyond financing
With officers getting equipped and IT operations gearing to support business, SKS has already started expanding its microfinance network to empower the poor through other means besides credit. Their partnership with German wholesaler, Metro Cash & Carry, is just one example.

Around six lakh SKS members took loans to open kirana shops as their micro-data enterprise. They normally went to the local market to buy goods for their stores. Because they bought merchandise in smaller quantities, they had to pay a higher price to the distributors.

To address this issue, SKS struck a deal with Metro to supply its products to the SKS-financed kirana stores.

“Metro has created a separate business model with us as this was a major business segment for them,” says Kalra.

As of date around 2,000 kirana stores have tied up with Metro to purchase products at wholesale prices. SKS gets a two percent commission from Metro.

SKS also charges a service fee of Rs 25 for deliveries up to Rs 4,000 while Rs 40 is charged for deliveries between Rs 4000 to Rs 12,500.

When the kirana stores receive the order, the shopkeepers get a credit period of 15 days to return the money to SKS without any interest. The collections are also fed into the mobile application of the field staff.

The company is also in the process of offering its customers loans for their housing needs. In December last year, it joined hands with the Housing Development Finance Corporation (HDFC) in its attempt to bridge the critical gap in the housing finance needs of the poor.

SKS's mission is to provide financial services to the poor in a sustainable manner. Nobel Peace Laureate Muhammad Yunus introduced to the world the concept of a social business and challenged the free market economy. He said, “because of the restrictions placed by capitalism and motivation to maximise profit, we have forgotten the social and emotional needs of human beings.” This is what SKS Microfinance is trying to regain.

ashwani.mishra@9dot9.in