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PROJECTS of microfinance


A detail description of ssfl microfinance

Submitted to:
Submitted by:
Dr. Anubha Gupta Rahul



1. Microfinance
2. Introduction about Spandana Sphoorty Financial Ltd (SSFL).

3. Bankers to Spandana.

4. Product & Services.

5. Performance of SSFL.

6. Top MFI’s in India.

Microfinance is the provision of financial services to low-
income clients or solidarity lending groups including consumers
and the self-employed, who traditionally lack access
to banking and related services. Microfinance is a broad category
of services, which includes microcredit. Microcredit is provision of
credit services to poor clients. Although microcredit is one of the
aspects of microfinance, conflation of the two terms is epidemic in
public discourse. Critics often attack microcredit while referring to
it indiscriminately as either 'microcredit' or 'microfinance


In developing economies and particularly in the rural areas, many

activities that would be classified in the developed world as
financial are not monetized: that is, money is not used to carry
them out. Almost by definition, poor people have very little money.
But circumstances often arise in their lives in which they need
money or the things money can buy.
In Stuart Rutherford’s recent book The Poor and Their Money, he
cites several types of needs:

 Lifecycle Needs: such as weddings, funerals, childbirth,

education, homebuilding, widowhood, old age.
 Personal Emergencies: such as sickness, injury,
unemployment, theft, harassment or death.
 Disasters: such as fires, floods, cyclones and man-made
events like war or bulldozing of dwellings.
 Investment Opportunities: expanding a business, buying
land or equipment, improving housing, securing a job (which
often requires paying a large bribe), etc.

Poor people find creative and often collaborative ways to meet

these needs, primarily through creating and exchanging different
forms of non-cash value. Common substitutes for cash vary from
country to country but typically include livestock, grains, jewelry,
and precious metals.
As Marguerite Robinson describes in The Microfinance
Revolution, the 1980s demonstrated that "microfinance could
provide large-scale outreach profitably," and in the 1990s,
"microfinance began to develop as an industry" (2001, p. 54). In
the 2000s, the microfinance industry's objective is to satisfy the
unmet demand on a much larger scale, and to play a role in
reducing poverty. While much progress has been made in
developing a viable, commercial microfinance sector in the last
few decades, several issues remain that need to be addressed
before the industry will be able to satisfy massive worldwide
demand. The obstacles or challenges to building a sound
commercial microfinance industry include:

 Inappropriate donor subsidies

 Poor regulation and supervision of deposit-taking MFIs
 Few MFIs that meet the needs for savings, remittances or
 Limited management capacity in MFIs
 Institutional inefficiencies
 Need for more dissemination and adoption of rural,
agricultural microfinance methodologies
Does microfinance really help
solve poverty?

Poverty is a very complicated issue, and many different

approaches and tools are required to address it. Microfinance is
one such tool. It has worked for millions of the working poor to lift
themselves out of poverty. However, microfinance is not the only
answer, and in fact is not always the appropriate answer – for all
poor and under all situations. For instance for the extreme poor,
or those who are sick and/or unable to work, microfinance may
not be an appropriate tool.

Microfinance as a tool to fighting poverty helps in increasing

household income, which leads to ancillary benefits: increased
food security, the building of assets, and an increased likelihood
of educating one’s children.

Microfinance is also a means for self-empowerment. It enables

the poor, especially women, to become economic agents of
change - they increase income, become business-owners and
reduce their vulnerability to external shocks (loss of breadwinner,
illness, weather, etc).
How did microfinance as an
industry evolve?
Microfinance as an industry evolved in all the third world countries
almost at the same time span. World over, it was getting widely
recognized that improving income levels of low-income
community is essential to improve their well-being – besides the
state sponsored welfare programmes. During the 1970s and
1980s, the microenterprise movement led to the emergence of
nongovernmental organizations (NGOs) that provided small loans
for the poor. In the 1990s, across the world, a number of these
institutions transformed themselves into formal financial
institutions in order to access and on-lend funds, thus enhancing
their outreach.

One of the significant events that helped it gained prominence in

the 1970s was through the efforts of Mohammad Yunus, a
microfinance pioneer and founder of the Grameen Bank of
Bangladesh. In 2006, Prof. Yunus and Grameen Bank were
awarded a Nobel Peace prize “for their efforts to create economic
and social development from below.”

In India, many formal financial institutional structures were

experimented with – Regional Rural Banks (RRBs), District
Central Credit Cooperative Banks (DCCBs), Local Area Banks
(LABs), Self-Help Group (SHG)- Bank linkage programme. All
these received mixed success and parallel, the civil society
organizations started feeling the need to offer financial services to
the poor. Credit was getting increasingly recognized as an
essential tool to break the vicious cycle of poverty.

Gradually, Microfinance Institutions emerged in 1990s and 2000s.

MFIs today differ in size and reach; some serve a few thousand
clients in their immediate geographical area, while others serve
hundreds of thousands, even millions, in a large geographical
region, through numerous branches.
Spandana Sphoorty Financial Ltd
Spandana Sphoorty Financial Limited is one of the largest
Microfinance Institution (MFI) in the world. Spandana provides
micro-credit and credit-plus services to low-income households
and individuals to improve their quality of life.

Spandana has steadfastly worked on improving

processes for credit delivery and client servicing. This has
helped in establishing benchmarks in operational efficiencies,
cost management and customer support. Thus the viability and
scalability of microfinance model has been re-enforced.

Supported by leading Banks and DFIs, Spandana has

demonstrated its ability to raise funds and leverage different
capital structures. We constantly Endeavour to deliver quality
services to our clients, by reaching out to their doorstep, through
our on-roll staff and by maintaining highest levels of transparency
and integrity. We strive to be the most preferred employer in the

CRISIL, one of the most trusted mainstream rating agencies has assigned
a long team ratings of ‘A-/Positive and Short term rating of /P1’ (best in
the industry) to our debt and bank facilities. The ratings reflect Spandana’s
strong market position in microfinance, sound asset quality, healthy
earnings profile, and adequate capitalization. These ratings indicate the
degree of safety regarding timely payment of financial obligations which
affirms our long term growth prospects.
An urge to pursue a strong idea - Startup team of Spandana
used to work for a Non-Government Organisation (NGO) in
planning, implementation and monitoring of development projects
that were funded predominantly by Grants. These activities had
reasonably good impact, however, the team was keen to develop
a sustainable community development model focused at low-
income community – which is financially viable, non-grant based
and scalable.
An opportunity in sight - One such demonstration came out of a
soft loan spandana gave to a poor push cart rented woman.
Spandana team realised such requirements had a potential to
scale up to a gigantic proportions. Exploring options of viability
spandana team evaluated global models in microfinance and
evaluated models that would work in localized geography.
The birth of Spandana - Spandana team gathered some money,
a few likeminded friends and family members who also bought
their idea and loads and loads of courage. Spandana team started
operating under their own NGO in 1998 and called it Spandana.
Spandana stands for Responsiveness, and in this context,
responsiveness to the needs of low-income clients
The courage of conviction - In the initial roll out, getting funding
from banks was challenging as the model had to be tested and
validated locally. Spandana continued alternative developmental
programmes like Healthcare, Nutrition, Sanitation etc.
Challenging the conventional - As the operations picked up,
Spandana questioned the logic of every conventional method,
therefore addressing the bottlenecks and building efficiencies –
which at that time all seemed like common sense.
Break-even surprise - As the financials of the first formal year of
operations were compiled, Spandana team was surprised that
they had achieved break-even. This was not by design but by
default since the efficiencies was becoming a culture for
Spandana to build on.
Initial Growth - In the first two years (1998-2000), around the turn
of the century, Spandana crossed its first milestone of Rs.1 crore
(10 million) disbursement and about 2,000 clients. Funds were
difficult to raise. Bankers were wary of this client segment since
the state directed credit given by Bankers had dismal repayment
rates. It took months of demonstrated repayment performance and
conviction of Spandana team, initial support of FWWB and
support of friends to lead to trickling-in of loan funds.
Achieving critical mass - By the year 2002, Spandana reached
out to about 15,000 clients. Around the same time, Bankers
started looking at MFIs as a reliable and Bankable entity. Rating
agencies like M-CRIL and CRISIL and many sector resource
organizations also played a critical role in critiquing and therefore
helping in institutionalization of the whole microfinance sector.
The fillip from Bankers - The performance of Spandana gave
confidence to Bankers to increase their exposure levels. FWWB
with its loans and capacity building support, SIDBI through its
IFAD supported Foundation for Microcredit and ICICI Bank with its
partnership model helped Spandana grow rapidly. Between 2001
to 2004, Spandana grew by over 250% compounded annual
growth rate. By end of 2004, Spandana had reached out to over 1
lakh (0.1 mn) clients and a Gross Loan Portfolio of over Rs.5.5
Transformation into NBFC - With scale, it became increasingly
clear that it is prudent to transform into a regulated entity and the
most suitable model available under the Indian regulatory
environment is Non-Banking Finance Company (NBFC).
Spandana transformed itself into an NBFC and started originated
new loans under the NBFC structure.

Strong fundamentals - Our operating costs are much lower than

comparable costs of Banks and STPL NBFCs. The delinquency
levels are nowhere comparable – our < 1% to their over 5%
historical average. The differentiator is that we strongly believe
that there is no good or bad client, it all depends on how we
treat them. We maintain a very high degree of client connect
and therefore ensure that our delinquencies are negligible.
Encouraging success stories - Every client household that
improves its economic condition, every smile that an improved
meal brings on the face of Spandana’s borrower, every
opportunity to avail health service that was beyond their reach and
every new educated child is our award and our recognition is the
support and faith of our clients and our employees.
Guntur Town, Andhra Pradesh, India. During a hot summer
afternoon of 1997, when most of the women would prefer a siesta,
Spandana team saw a rag-picker woman on the street buying
household reject items on a push cart. Their entrepreneurship
made Spandana team curious. Speaking to her, Spandana team
realized that the lady was working very hard but not getting
commensurate returns. Despite her efforts, she was able to
provide only one meal to her family. This was mainly because the
lady was paying an exploitative daily rent for the cart that
cumulatively far exceeded the cost of buying scores of such carts.
The lack of access to affordable and serviceable capital was
leaving little alternative options for her. While a bank would never
provide credit to her on many accounts, the money-lender was far
too exploitative. Spandana team decided to lend her a little
money, enough to buy the cart. The money was given with a
promise of timely and reasonable repayments. The hard working
woman started using her new self-owned push cart, she could
save on the rent cost and repaid the money conveniently from her
increased returns. Now this women could afford better meals for
herself and her children. She also spread the word that there was
a Micro Finance company named SPANDANA which was helping
economically active women with loans. It seemed to strike the
right chord with several low-income people, and soon there were
many waiting to meet Spandana team at their doorstep.
(as on 31 March 2010)
Number of Clients
4.17 mn
Number of Branches
Portfolio Outstanding
Rs. 35,400 mn
Disbursements (FY 2010)
Rs. 58,090 mn
No. of Districts

Name Spandana Sphoorty Financial Ltd

Headquarter Hyderabad, Andhra Pradesh
Legal Status Public Ltd. Company (NBFC)
Lending Model JLG, Individual
Number of Branches 696
Loan Outstanding (Rs. Mn)
(As on September 30, 2008)
(As on September 30, 2008)
Net Worth (Rs. Mn)
(As on September 30, 2008)
Portfolio Yield (%)
(Apr 1-Sep 30, 2008)
OSS (%)(Apr 1-Sep 30, 2008) 132.02
Current Portfolio (%)
(As on September 30, 2008)
Debt to Net Worth (Times)
(As on September 30, 2008)

Products & Services

Credit Products
Loan products confirm to the convenience of clients in processing
and loan servicing. All the terms of loan are disclosed to the
clients to maintain transparency, no hidden charges in the name
of value added services and compliance with statutory

» General Loan (Abhilasha)

» Micro Enterprise Loan (Pragathi)
» Individual Loan (Spoorthy)
» Income Generating Loan (Samruddhi)
» Agri-Family Loan (Dharani)
» Farm Equipment Loan

Credit Rating Information Services of India
Limited (CRISIL) has also been rating
Spandana since the last few years. CRISIL is
one of the best reliable opinions on risk.
CRISIL has accorded Spandana with the
highest rating grade of mfR1 – with this;
Spandana becomes the first MFI to achieve this

CRISIL has also assessed Spandana for –

• Rating for short term debt: P1 (It

indicates Safety and timely payment of
interest and principle in the instrument is
very strong).

• Rating for bank facility: A-/Postive (It

indicates stability and adequate degree of
safety with regard to timely payment of
interest and principle in instrument is
M-CRIL Ratings:
First Rating of Spandana was conducted by
Micro-Credit Ratings International limited (M-
CRIL). M-CRIL is world’s largest specialized
microfinance rating agency accredited by the
World Bank-Consultative Group to Assist the
Poor (CGAP).

Spandana was benchmarked as one of the most

cost efficient MFIs in the world. Spandana has
maintained that standing since then.
Following are the ratings/ gradings achieved by Spandana .

Year 01 02 03 04 05 06 07 08 09 10

M-CRIL rating* α α α+ α+
grading** 2 2

Top Microfinance Institutions in

In late 2009, CRISIL which is India’s leading ratings,
research and risk advisory company released its list of
top microfinance institutions in India.
1 SKS Microfinance Ltd (SKSMPL)
2 Spandana Sphoorty Financial Ltd (SSFL)
3 Share Microfin Limited (SML)
4 Asmitha Microfin Ltd (AML)
5 Shri Kshetra Dharmasthala Rural Development
6 Bhartiya Samruddhi Finance Limited (BSFL)
7 Bandhan Society
8 Cashpor Micro Credit (CMC)
9 Grama Vidiyal Micro Finance Pvt Ltd (GVMFL)
10 Grameen FinancialServices Pvt Ltd (GFSPL)
11 Madura Micro Finance Ltd (MMFL)
12 BSS Microfinance Bangalore Pvt Ltd (BMPL)
13 Equitas Micro Finance India P Ltd (Equitas)
14 Bandhan Financial Services Pvt Ltd (BFSPL)
15 Sarvodaya Nano Finance Ltd (SNFL)