About The Company

The company has been formed for the purpose of extending micro credit to people who are otherwise unable to access finance from the mainstream banking channels. The alternate source for such people normally is the private money lenders whose rates of interest ranges anywhere from 30% to upwards of 100%.

The objective of the company is to make available finance at reasonable cost and in a transparent manner to such customers and aim to achieve acceptable returns on investment so that we can continuously attract mainstream capital and human resources to better serve the chosen client segments.

Equitas Development Initiatives Trust (EDIT) is a not for profit organization formed for the purpose of promoting education amongst poor children and also seek to play a positive role in the lives of ultra poor such as pavement dwellers and beggars. The company is committed to contribute 5% of its annual profits to this Trust.

Background

The company has been floated by Mr. P N Vasudevan jointly with Mr. M Anandan and Mr. V P Nandakumar. Mr. Vasudevan comes with substantial experience in the NBFC business having been Vice President in Cholamandalam Investment & Finance Co Ltd, Chennai handling their retail business division comprising of vehicle finance with operations and as head of Retail Banking in Development Credit Bank Limited, Mumbai.

Mr. P N Vasudevan - Managing Director, Equitas Micro Finance India Private Ltd.,

The company is managed by the Managing Director under the supervision, guidance and control of the Board.

The company has built up a strong management team comprising of professionals with expertise in their respective areas of operation. This management team has the experience of having managed large organisations and can handle scale up very well.

The company has been selected as a partner for receiving of technical advisory services from Unitus Advisors P Ltd, a global micro finance accelerator. Unitus has come forward to partner us from our inception stage itself. We have already had intense interaction with their functional experts in areas such as business model, product development and processes and expect to benefit from their global experience in working with other MFIs.

We operate under the Grameen model with suitable adaptations. The customers would be formed into groups consisting of 5 members and 3 to 6 groups would be clubbed to form a center. Each group and center would have one leader. The groups would be joint liability groups with each member of the group guaranteeing the loan repayment of the other members of the group.

Sales Process

The Sales Officer of the company would be visiting the identified areas and communicate the salient features of the company’s schemes. The process would be as follows:

Credit Screening

Applicants would be screened from a credit perspective. Some of the criteria to be checked would be longevity in the same place of residence (minimum 5 years to be there), nature of business and activity level to support the borrowing, income to expense ratio and ability to service loan, etc.

After this, the sales officer would visit each customers’ house and do a physical verification to satisfy the veracity of all the statements in the application form.

The papers would be submitted to the Branch Manager and credit approval would be done based on delegated powers. The Branch Manager would also visit randomly customers’ houses for cross checking on the due process.

Once approved, the papers would be sent to the back office at Chennai and the same would be data entered into the system and the proposal approved for payment. Once the same is done, the branch would invite the customers on a center wise basis to the branch and disbursement would take place at the branch.

Collections would be done in centre meetings to be held every fortnight. In each quarter, while 5 meetings would be conducted solely for the purpose of collections, one meeting per quarter would be used for obtaining feedback on the service levels, other add on features, customer requirements etc and same would be fed back to a central desk for appropriate action. We plan to use technology at the centre meetings in the form of either hand held or mobile based receipting system which would improve controls and reduce transaction costs and pushing up productivity of relationship officers.

System

We have a mature and flexible core banking solution TEMENOS T24 in place. This product is an extension of T24 Banking software, developed specifically for Microfinance and Community Banking sector. To date, Temenos with more than 10 years of experience in this sector, has implemented T24 for Microfinance and Community Banking for more than 60 clients spanning across 50 countries, many with multiple sites.

Some features specifically built for Microfinance and Community Banking are :

• Peer or Relationship based lending methodologies

• Exception based payment or Batch processing payments

• Exception based Collection posting process

• Contract and Account based lending

• Flat Interest methodology

• Local reference fields for Age, Gender, District of residence etc.. all of which are cross validated during loan processing to ensure that the applicants meet the required criteria.

• A product designer to create new products

• Investor Funds Tracking to report on fund management

• Management of loans written-off

• Workflow processing and cash flow reporting

• Comprehensive setup of Interest and Charges

The core banking software runs on high-end IBM P-Series servers, external Storage in SAN, and AIX operating system platform.

About Micro Finance

In the development paradigm, micro-finance has evolved as a need-based policy and programme to cater to the so far neglected target groups (women, poor, rural, deprived, etc.). Its evolution is based on the concern of all developing countries for empowerment of the poor and the alleviation of poverty.

For the target group members, the most obvious benefit is that micro-finance programmes would actually succeed in enabling them to increase their income levels. Furthermore, the poor are able to access financial services which previously were exclusively available to the upper and middle income population. Finally, the access to credit and the opportunity to begin or to expand a micro-enterprise may be empowering to the poor, especially in comparison to other development initiatives which often treat these specific target group members as recipients.

Micro Finance In India

India with a population little over 1 billion has its 70% people staying in rural or semi urban areas with almost 260 million people living below poverty line. Approximately 75 million households need micro-finance. Of these, nearly 60 million households are in rural India and the remaining 15 million are urban slum dwellers. The current annual credit usage by these households is estimated to be Rs. 495,000 million. As in the past, poverty and rural development remains the daunting challenge for India even today. The Marginalization of rural/urban poor from the mainstream society is primarily caused by the absence of the three forms of Capitals from the Poor, namely Material Capital, Human capital (Education and relevant skills) and Social Capital (Local Organizational settings, democratic system, protection of Human rights). Most of them are landless or marginal land owners dependent upon traditional farming practices. They have to rely heavily upon the Monsoon. In absence of proper education and skills their employability in non-farming jobs is very low. The traditional ways of resource allocation (Public Distribution System) has not fully succeeded in meeting its objectives. Corruption has always remained an inseparable part of such systems.

Microfinance addresses the shortage of physical capital amongst the Poor and thus directly affects the creation of Human Capital for the Poor. In this era of corporate social awareness Microfinance not just substantiates the claim of corporate citizenship but it also extends the reach to this marginalized segment of the society.

Microfinance aims at providing broad range of financial services such as

• Business Loans

• Education loans

• Emergency Loans

• Deposits

• Insurance to poor and low-income house holds.

The main objective is to develop institutional financial self-sufficiency and to penetrate breadth and depth wise across the low-income groups/individuals, profitably.

Micro Finance Product Common Features ( Detailed )

Purpose of Loan

The loan is given for the following purposes,

1. Loan for business expansion

2. Loan for starting business

3. To repay the high interest borrowing

4. Loan consolidation

5. Education

The primary responsibility of collection is with Relationship Officer. The Relationship officer along with branch manger ensures that the installments are collected during center meeting.

All clients have to pay Rs.50/- as membership fee which is not refundable. This will be collected during submission of loan application form.

No processing fee will be collected for any of the loans.

Insurance administration charges will be collected for the loans as per the details given in the loan product summary.

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