GREETINGS TO ALL ON BEHALF OF THE SHGs WHO ARE THE OWNERS OF THIS UNIQUE INSTITUTION

Genesis of the Organization

Association for Sarva Seva Farms (ASSEFA- an NGO Registered under the TamilNadu Societies Registration Act, 1872 in the year 1969) started working with rural communities based on the concepts of Sarvodaya and empowerment of the rural communities adopting the multi-sector approach for development. Started working with the State Government in the IFAD funded initiative for the betterment of women through Self Help Groups. IFAD funded TamilNadu Womens Development Project came to a close in 1999 but thousands of SHGs in scattered locations were in need of continuous & easy access to credit. SHGs were federated at the block level into Mutual Benefit Trusts. The legal status of the Federations is private mutual benefit trusts which can have transactions only with its members. The bye-laws of the Mutual Benefit Trusts were specially designed to allow them to invest in Corporate entities & to borrow from F.I.s

Evolution of the Federations

There are gatherings of womens SHGs at the village and cluster level but they do not play the role of financial intermediaries. At the block level the SHGs are federated into MBTs. Each SHG has to pay a one-time admission fee, fill an Entrance form and execute the inter-se agreement to become a member of the Federation. The SHGs constitute the General Body of the Trust. Three of the Board of Trustees of the MBTs are filled up by nomination from the different project constituents of ASSEFA like Dairy, Education, Health etc.; four by election from the SHGs in the General Body; and two from the public by co-option. The SHGs give their concurrence in the form of a resolution to the proposal to utilise the community resources (in the form of Project grants, matching grants, etc.) to invest in the shares of corporate entities. The savings of the members of the SHGs is not accessed by the federations at any stage of the process.

Evolution of the Federations (Contd.)

The Mutual Benefit Trusts acquired the shares in Sarvodaya Nano Finance Limited by utilising the community resources meant for the benefit of the SHGs. The limitations of the MBTs in raising external borrowings were understood and the need for a different entity to take on this borrowing responsibility was felt. The Community resources are used as seed money for leveraging bigger loans. Sarvodaya Nano Finance Limited takes on the responsibility for raising loans from financial institutions to meet the credit needs of the women SHGs. Sarvodaya Nano Finance Limited starts borrowing funds from institutions like SIDBI.

Structure of SHG Federation

Sarvodaya Nano Finance Limited Non Banking Financial Company
Sarvodaya Mutual Benefit Trust (Private Mutual Benefit Trust)
Self-Help Groups Cluster level

Shareholder in NBFC

Block Level Entity (Tax Paying entity)

Self-Help Groups Cluster level

Self-Help Groups Cluster level

Cluster level (Non financial)

Members of General Body of SMBT

Self-Help Groups Village level

Self-Help Groups Village level

Self-Help Groups Village level

Members

Members

Members

Organisation Chart of the Mutual Benefit Trust

Board of Trustees (Nomination, Election & Co-option) He is also the Manager (Business Development) of the NBFC in the block

Chairperson (Nomination)

CEO (Appointment)

Field Officers (30-40 SHGs)

Field Officers (30-40 SHGs)

Field Officers (30-40 SHGs)

Field Officers (30-40 SHGs)

Self-Help Groups

Self-Help Groups

Self-Help Groups

Self-Help Groups

Nature of relationship between the NBFC & the MBTs

The MBTs have a unique relationship with the NBFC as they are the members in and borrowers from the NBFC. The Company not only takes care of the credit needs but also the more important role of Capacity Building of the MBTs. The support for the MBTs constitutes 80 % of the CB support budget. The MBTs are independent legal entities with a Board of Trustees. Though the operational level matters at the trust level are handled independently, the MBTs look up to the NBFC for support and guidance on policy matters. But the lender-borrower relationship is on commercial basis and it is quite clear and unambiguous. Loans are based on Loan Agreements, applications and the decision of the Loan Committee. Delayed payments are not condoned and they attract penal charges. Monthly reports from the MBTs need to be sent without delay.

Rationale
Poor women become members of Self Help Groups Self Help Groups become members of Federations of SHGs i.e Mutual Benefit Trusts by paying a one-time admission fee. The federations have the legal status of Mutual Benefit Trusts. The Mutual Benefit Trusts are members i.e. de-jure shareholders of Sarvodaya Nano Finance Limited. Only MBTs that are shareholders of the Company are eligible for loans from the Company. The quantum of loan will depend, inter-alia, the shareholding of the trust in the Company and the Net Worth of the Company as per the NBFC norms.

Methodology
The SMBTs prepare the Business Plan for the respective federations and this is finalised in consultation with the Company staff. The Business Plan includes details of the villages covered, existing and planned SHGs, credit requirements etc. Sarvodaya Nano Finance Limited consolidates the Business Plans of the trusts and prepares the overall Business Plan for the Company. Sarvodaya Nano Finance Limited borrows funds from external sources. Sarvodaya Nano Finance Limited enters into a Loan Agreement with the Mutual Benefit Trust. Sarvodaya Nano Finance Limited lends to the Mutual Benefit Trusts in accordance with the Loan Agreement and a Loan Application.

Methodology (Contd.)
The Mutual Benefit Trust enters into a Loan Agreement with the SHGs. The SHGs apply for a loan under a specific product backed by a resolution. Then they lend to the Self Help Groups based on the Loan Agreement, Loan Application and the results of the Grading Exercise. Utilisation Certificates confirm the appropriate usage of the loan at the member level.

Salient Features of Operations

Loan Committees at the MBT & the Company decide the sanction and quantum of loan. Grading of SHGs done by external staff, in a participatory manner. Independent Appraisal of Loan Applications. Grades of the SHGs as well as their age, quantum of savings, rotation of savings etc. taken into account. Uniform software for all the Trust Locations All loan disbursements through cheques only. All loan repayments are done only at the Trust Office; no cash repayment to field staff is allowed.

Salient Features of Operations (Contd.)

Savings of members of SHGs are not accessed by the Federations. Standardised loan agreement and application forms. Standardised documentation procedures for transactions at all levels. The MBTs file their annual IT returns and also pay taxes wherever due. The surplus from the credit operations are utilised for creating a Reserve in the MBT and the balance is allocated among the member SHGs.

About the NBFC

Sarvodaya Nano Finance Limited

ISION

To transform Sarvodaya Nano Finance Limited into

a truly community owned Micro-Finance Institution that will instantly symbolize a fair, client - friendly, accessible, and transparent institution.

ISSION

To facilitate easy and timely access to credit and

other financial services for the rural population especially poor women and rural artisans through a network of Mutual Benefit Trusts located in their vicinity.

Management Board of Directors

Shri Vijay Mahajan Shri Deep Joshi Ms. Bharti Gupta Ramola Shri S. Loganathan Shri S. Viswanatha Prasad

Key Dates
Certificate of Incorporation : 1 July 1996 Certificate of commencement of Business: 10 October 1996 Registration as NBFC with RBI: 19 August 1999 Commencement of operations in TamilNadu : 13 July 2001

Details of Coverage
No. of States : 1 No. of districts : 10 No. of Trusts : 27 No. of villages : 2812 No. of Self-Help Groups : 4065 No. of members in Self-Help Groups : 74601

Staff Composition
Staff at Headquarters : 10 SNFL Staff in field locations : 20 Staff on field training : 6 Total : 37 Staff employed by the Trusts : 191

Highlights of Performance 2002-03

No. of SMBTs Assisted No. of SHGs loans given Loan Outstanding (31.03.03) Loan Disbursed (2002-03) Profit Before Tax Operational Self Sufficiency Financial Self Sufficiency Operational Efficiency Operational Efficiency (excluding MBT Expenses) 20 2975 970.14 lakhs 1833.67 lakhs 5.86 lakhs 184 % 111 % 10.1 % 4.79 %

Credit Operations
No. of Trusts assisted No. of SHGs assisted No. of Individual borrowers Amount of Loan Issued Average Loan Size (Per Individual Borrower) Loan Demand Loan Repayments Loan Outstanding (Cumulative) On-Time Repayment Rate : : : 20 2975 34285 Rs. : 1833.67 lakhs : 4601/: 1142.23 lakhs : 1136.83 lakhs : 970.14 lakhs : 99.53%

Rs. in lakhs

100

150

200

250

300

350

50
113.94 137.9 126.53 175.76 89.07 164.24 195.34 177.45 168.82 168.40 193.89 187.33 80.75 193.70 142.43 192.65 76.54 188.05 168.05 227.7 162.65 281.39 315.67 202.3

0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Loans released Loans planned

Loans planned and released

Grades of Groups in %

60 50 40 30 20 10 0 June Sept. December Mar-03 A B C D

% of SHG's

Savings and Internal Rotation

Savings and Internal Rotation

5000 4000
Rs. in lakhs

3000 2000 1000 0 Savings Internal Rotation Interest earned April 491.23 2517.34 251.99 June 605.70 2992.88 279.15 Sep 709.92 3138.71 284.19 Dec 812.99 3422.94 304.34 Mar-03 917.55 4000.31 315.51

Savings

Internal Rotation

Interest earned

Share Capital
Vir udunagar nath am kalligud i indivi duals vadugapatti viralimalai tir umangalam nilak ottai narik udi alangud i siv agangai vembakkam anak kavur vandavasi achirapak kam vriddachalam thyagadu ragam chinn asalem kallakurichi sankar apur am Ri sh ivanday am gingee

50.00 0.5 12.22 0.66 18.90 14.18 1.10 8.30 23.68 6.00 2.81 11.58 14.06 14.42 10.75 84.73 19.59 25.85 31.19 64.83 57.17 68.83

Share Capital & Loan Outstanding

Share Capital and Loan O/S

733.38

462.224 806.95

728.82

Rs. in lakhs

1000 500

AS ON 30-06-02

AS ON 30-09-02

SHARE CAPITAL

LOANS DISBURSED

AS ON 31-12-02

LOANS OUTSTANDING

AS ON 31.03.03

420.16

470.98

482.79

1500

543.73

970.14

2000

1365

1665

2500

2311.08

Repayment Performance

2500 2000
Rs. in lakhs

2311.08

1500 1000 500 0

1142.23

Loans sanctioned

Demand

Collection

1136.83

OTRR

99.53%

How they used the Credit

House Repairs 2% Agricuture 3%

Family Functions 18%

Micro Enterprise 21% Education 2% Animal Husbandry 5%

Manufacturing 36%

Clearing old loans 5% Manufacturing 36% Medical 3%

Business Plan for 2003-04

A. B. C. D. E. Trusts to be assisted S.H.Gs to be assisted Individual Borrowers Share Capital Borrowings (Cumulative) Disbursement Average Loan Size Year end Outstanding Total Income Operational & Other Costs Profit : : : : : : : : : : : 30 4500 58,520
Rs.

100 m 146 m 327.82 m 5601 206.25 m 21.69 m 19.11 m 2.59 m

F.

GROWTH PLANS
2002-03 OUTREACH SMBT's SHG's MEMBERS VOLUME OF CREDIT PORTFOLIO O/S 20 2975 41955 1833.67 970.14 42 4500 58520 3278.23 2062.52 22 1525 16565 1444.56 1092.38 110 51 39 79 113 2003-04 Increase Growth in terms of %

Projections for 2003-04

No. of SMBTs to be assisted Paid up Equity Share Capital No. of SHGs to be assisted No. of borrowers to be assisted Total Loans to be disbursed Average loan size per group Average loan size per member External Borrowing (2003-04) Cumulative External Borrowing 30 -- 720 lakhs -- 4500 58520 -- 3278.23 lakhs -- 72850 -- 5602 -- 930 lakhs -- 1503.90 lakhs